
What to Save for When Buying a Home
Buying a home is an exciting milestone, but knowing what to budget for can feel intimidating. The good news? With a clear understanding of the costs you might encounter, you can take control of the process and move forward with confidence.
Here’s what experts recommend you focus on as you plan your savings strategy:
1. Down Payment
Your down payment is likely the first expense on your mind. But how much do you really need? Many people believe a 20% down payment is required, but that’s not always true. Depending on your loan type, you might need as little as 3.5% or even 0% down.
As The Mortgage Reports explains:
“The amount you need to put down will depend on a variety of factors, including the loan type and your financial goals. If you don’t have a large down payment saved up, don’t worry—there are plenty of options available.”
A trusted lender can walk you through your options, including loan types, down payment requirements, and potential assistance programs. Working with professionals early on will help you identify what works best for your situation.
2. Closing Costs
Closing costs are another essential expense to plan for. These fees, which cover things like appraisals, title insurance, and loan origination, typically range from 2% to 5% of your total loan amount. As Bankrate puts it:
“Mortgage closing costs are the fees associated with buying a home that you must pay on closing day.”
Your lender can give you an accurate estimate of your closing costs and answer any questions, so you’re well-prepared. Don’t forget to also budget for your real estate agent’s professional service fee, unless the seller covers it. Discussing these costs with your agent ahead of time will ensure there are no surprises on closing day.
3. Earnest Money Deposit
An earnest money deposit (EMD) is an optional but common part of the homebuying process. Typically ranging from 1% to 2% of the home’s price, this deposit shows the seller that you’re serious about your offer.
While it’s not an additional cost—your EMD is applied toward your down payment and closing costs—it does require upfront cash. As Realtor.com explains:
“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.”
Your real estate advisor can guide you on whether an EMD is necessary and how much to offer based on your local market. This insight will help you make informed decisions as you negotiate.
Bottom Line
A successful homebuying journey starts with a solid savings plan. By understanding what to budget for—down payments, closing costs, and more—you can handle the process with ease. Partnering with an expert agent and trusted lender will provide the knowledge and support you need to achieve your homeownership dreams.
Ready to start your homebuying journey? Let us, Carolina Coastal Group, guide you every step of the way. Call or text us at (910) 338-0456 to take the first step toward your new home!