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Am I Ready to Buy a House?

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Am I Ready to Buy a House?

If you’re planning to buy a home, knowing what to budget for and how to save may sound intimidating – but it doesn’t have to be. One way to ease those concerns is to make sure you understand some of the costs you may encounter up front. And to do that, always turn to trusted real estate professionals. They can help you set a plan and take a strategic look at your budget and your process before you even get started.

Here are just a few things experts say you should be thinking about.

Down Payment

Saving for your down payment is likely top of mind as you set out to buy a home. But do you know how much you’ll need? While every buyer’s situation is different, there’s a common misconception that putting 20% of the purchase price down is required. An article from the Mortgage Reports explains why that’s not always the case:

“The idea that you have to put 20% down on a house is a myth. . . . The right amount depends on your current savings and your home buying goals.”

To understand your options, partner with trusted real estate professionals to go over the various loan types, down payment assistance programs, and what each one requires. The more you know ahead of time, the easier the process will be.

In addition, the minimum amount required to put down on a conventional loan is just 3% with a 97% Loan to Value (LTV), but Private Mortgage Insurance (PMI) will be required at that amount, which falls off when the equity in your home reaches 20%. An FHA loan has a minimum requirement of 3.5%. Of course, there are also specialty loans that grant the borrower 100% financing with no or little down payment, but the interest rate is typically higher. Other down payment options include a USDA loan for rural areas and a VA loan, both of which have $0 down payment. We can explore all avenues together. Ask me about which option may be right for you!

Closing Costs

Make sure you also budget for closing costs, which are a collection of fees and payments made to the various parties involved in your transaction. Bankrate explains:

Closing costs are the fees you pay when finalizing a real estate transaction, whether you’re refinancing a mortgage or buying a new home. These costs can amount to 2 to 5 percent of the mortgage so it’s important to be financially prepared for this expense.”

The best way to understand what you’ll need at the closing table is to work with a trusted lender. They can provide you with answers to the questions you might have.

Earnest Money Deposit

If you want to cover all your bases, you can also consider saving for an earnest money deposit (EMD). An EMD is money you pay as a show of good faith when you make an offer on a house. It’s usually around 1% of the total home price, but it can vary.

This deposit works like a credit. It’s not an added expense – it’s paying a portion of your costs upfront. You’re using some of the money you’ve already saved for your purchase to show the seller you’re committed and serious about buying their house and is the first bit of equity in your home alongside the down payment.

“It tells the real estate seller you’re in earnest as a buyer . . . Assuming that all goes well and the buyer’s good-faith offer is accepted by the seller, the earnest money funds go toward the down payment and closing costs. In effect, earnest money is just paying more of the down payment and closing costs upfront.”

It is important to work with a real estate professional to understand what’s best for your situation and any specific requirements in your local area. We will advise you on what moves you should make so you can make the best possible decisions throughout the buying process.

When buying a home, being informed about what to save for is key. Let’s connect so you’ll have an expert on your side to answer any questions you have along the way.

Realtors Offer Value!

To start your home search with the Crawford Willis Group, contact us today at 334.663.2950 or email Matt at matt@crawfordwillisgroup.com. You can also browse your website and download the HomeSearchNOW app to more easily browse the current listings of houses for sale in the Auburn/Opelika area in Alabama. With the Crawford Willis Group by your side, you can turn your dream of homeownership into a reality while enjoying a stress-free home buying journey.

Remember, working with a Realtor is the key to unlocking your dream home in Auburn Opelika, Alabama. So don’t hesitate! Reach out to the Crawford Willis Group today and let us help you find the home you’ve always wanted.

Matt Willis
Opelika, AL
Qualified Broker, REALTOR®
(334) 663-2950
matt@crawfordwillisgroup.com

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