First Time Homebuyer Information & Education
How much cash will I need to purchase a home
How much cash will I need to purchase a home - The amount of cash that is necessary depends on a number of items. Generally speaking, though, you will need to supply:
For homebuyers in California, I offer a unique service. If you choose to use me to represent you as you buyer's agent in addition to securing your financing, I can usually credit several thousand dollars towards your closing costs.
Even though you're under the impression that all your closing costs will be paid due to seller concessions, sometimes lenders ask for more than what your loan officer expects, such as 6 months tax reserves, when normally it would be 3 months, etc. Don't be surprised if you have to supply a pittance at the closing table.
You will be provided with a HUD (settlement statement) before closing which details the closing costs and the exact amount you need to bring to the table. A good broker will be able to help you calculate with good accuracy (not exact) what you charges will be.
Although one can easily obtain mortgage financing without putting up much cash investment, a homebuyer can often get better loan terms with a larger down payment. home buyers with at least 20% down payment often get the lowest interest rates available.
Don't forget that you will also need to purchase homeowner's insurance in order to complete the transaction. You will have to prove that a full year of homeowner's insurance has been paid for. If you think that you may be a little short on cash, consider putting down less earnest money in order to cover the homeowner's insurance. Many times you can save money on your homeowner's insurance by going to the same person that provides you with your car insurance and any other type of insurance you may have.
Down payment money can often be taken from retirement accounts subject to some restrictions. Contact your mortgage professional and your tax professional to see if a loan from your retirement account or an early withdrawal may be right for you.
If you are in a situation where you would rather save your money then lock it into a home, there is always the possibility of asking for a seller concession and try to get approved for 100% mortgage financing.
In some cases it is even possible to purchase a home with only slightest, or in some instances, even no earnest money deposit. Combined with seller concessions and/or no closing cost loans, it is possible to get into a home with actually no out of pocket expenses.
While this it is possible in today's lending climate to buy a home with literally no money down, it behooves the borrower to at least expect and prepare for some minimal expenses. Look at it this way, if you can buy a home for as little as first and last months deposit for a rental home, you are way ahead.
You must be prepared to come up with the closing costs plus 1 years worth of homeowners insurance upfront, pay for any application fees, appraisal fees and inspection fees.
Look at it from a lender's perspective: If you put a large downpayment into a home, you aren't likely going to default. With this lower risk comes better terms on your mortgage. While you may need no cash to purchase a home, having cash will allow you to secure a lower rate on your mortgage.
Home Purchase Loans - One of the many issues concerning Home Purchase Loans is the size of the down payment. The down payment is the difference between the loan amount and the lower of sale price or appraised value. Many borrowers have no down payment decision to make because they donít have the money for one. Their challenge is qualifying for a loan without a down payment, for which purpose excellent credit is critically important.
The bottom line is that different lenders offer the best deal in different market niches, and shopping for a Home Purchase Loan is the only way to find out who offers the best deal on your loan. Call or do a quick online aplication with First Security Financial Services, Inc. to find out what your best home purchase loan would be.
Home purchase loans often require your downpayment and any assets being claimed on your mortgage application to be "sourced and seasoned" for 2 months or more, meaning you will have to account for where the money came from and tie the money up in your bank accounts for the period of time stipulated by the mortgage company, prior to the close of the loan.
Another consideration when looking for a Home Purchase Loan is shopping lenders. Lenders vary the terms they offer borrowers based on a large number of loan, borrower and property characteristics that they believe affect the risk or cost of the loan to them.
When looking to purchase a home it is important to have your W2's, most recent paystubs, 2 months of statements of your most recent asset statements (401k, IRA, mutual funds, checking accounts, savings accounts, money market accounts, etc...), and copies of 12 months of cancelled rent checks (if you have them) readily available to get pre-approved for a mortgage. You can get pre-qualified based on providing most of this information over the phone, however if you want to get pre-approved you will most likely need to provide your mortgage agent this information for a more accurate and more reliable pre-approval. There is a difference between a pre-qualification and a pre-approval. To be pre-qualified is a generic term used that is based on loosely obtained information. However, a pre-approval is a more accurate and more reliable approval that is required by most Realtors and Sellers to show your good faith and your seriousness about bidding on and buying a home.
Home purchase loans are readily available to all types of borrowers even those with credit issues. Home purchase loans today come with low downpayment requirements. It is even possible to get a home purchase loan without a downpayment at all.Plus, there are numerous government loan programs for low income borrowers which do not place a great emphasis on past credit history.
Information listed above is to be used for educational purposes only and is not guaranteed
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