Key Considerations For Home Savings In 2024
If you're considering the purchase of a home, the prospect of budgeting and saving might initially seem overwhelming. However, it doesn't have to be a daunting task. A practical approach to alleviating these concerns is ensuring a clear understanding of the upfront costs involved. Turning to reliable real estate professionals is a key step in formulating a plan and strategically assessing your budget and process before embarking on your home-buying journey.
Consider the following insights from experts:
1. Down Payment
Saving your down payment is likely a primary concern as you embark on the path to homeownership. However, it's crucial to understand the actual amount required. While each buyer's situation varies, there is a common misconception that a 20% down payment is mandatory. An article from the Mortgage Reports dispels this notion and explains why this figure may not always be applicable.
“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 gain a comprehensive understanding of your choices, collaborate with reliable real estate professionals who can guide you through different loan types, down payment assistance programs, and their respective requirements. The more insights you gather in advance, the smoother the overall process will become.
2. Closing Costs
Additionally, allocate funds for closing costs, encompassing a range of fees and payments directed to various parties participating in your transaction. Bankrate provides a detailed explanation:
“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.”
For a comprehensive understanding of the financial requirements at the closing table, partnering with a trusted lender is the most effective approach. They can address any questions you may have and provide valuable insights.
3. Earnest Money Deposit
To ensure thorough preparation, consider saving for an Earnest Money Deposit (EMD). This deposit serves as a demonstration of good faith when submitting an offer for a house. As per Realtor.com, it typically ranges between 1% and 2% of the total home price.
The EMD functions as a credit, utilizing a portion of the funds you've already saved for the purchase to signify your commitment and seriousness to the seller. Realtor.com outlines its role in the sales process:
“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.”
Remember, an Earnest Money Deposit (EMD) is not mandatory, and its submission doesn't guarantee acceptance of your offer. It's crucial to collaborate with a real estate agent to assess what aligns with your specific situation and any locality-specific prerequisites. Their guidance will assist you in making well-informed decisions throughout the home-buying journey.
Acquiring essential information about what to budget for is paramount when purchasing a home. Engage the services of a local real estate agent, like us, to have an expert ally, ready to address your inquiries and support you throughout the entire process. Contact us today.