For most people, the finances are the most stressful part of buying a home. However, if you are prepared with an understanding of how the numbers work, things like a mortgage and a down payment are less daunting. Here are a few home financing tips every home buyer should know.
You really do not need to put 20% down.
It is still a common misconception in 2021 that a buyer must put down 20% down when buying a home. Believe it or not, many first-time home buyers put down only 5% on their home purchase. However, keep in mind, the more you put down on a home, the smaller your monthly mortgage payments will be. Depending on your financial situation, if you can put down 20% you will avoid having to pay mortgage insurance. This is typically required by the lender if you put down less than 20%.
You need to budget for closing costs.
All too often buyers forget to include closing costs into their home budget. First-time homebuyers are often blown away by how much they can add up. In most cases, closing costs can total up to 5% of the total loan amount. They are to be paid in cash and include things like the appraisal, homeowners insurance, transfer taxes, broker and escrow fees. Many people also do not know that sometimes closing costs can be negotiable. It is not uncommon for buyers to request that the seller takes care of the closing costs.
Be sure to shop around for a lender.
For whatever reason, many homebuyers neglect to speak to multiple lenders. What many of these people do not realize is they could be saving a ton of money by shopping around. For this reason, it is in a buyer’s best interest to buy around 5 quotes before making a decision. While saving 0.15% may seem insignificant, it really does adds up over time.