A. The simple answer is – IT DEPENDS. It depends on a number of factors including:
- The purchase price of the home
- The type of loan
- What monthly payment is in your comfort zone.
When you purchase a home, you need to have enough money for the down payment, closing costs and pre-paid items. Closing costs are the costs of the various service providers in the process, including:
- Your lender
- Your realtor
- Title company
- Governmental fees
- Per Diem Interest
Pre-paid items include funds that is placed in an escrow account for the purpose of paying your future property tax and homeowners insurance bill. Pre-paid items are only collected and placed in an escrow account if you are obtaining a mortgage. Cash purchases do not have pre-paid items or an escrow account.
The down payment amount will affect your monthly payment. The more you put down the lower your monthly payment will be. Different loans require you to put down different down payment amounts. Regardless of what the loan-required minimum downpayments, you can choose to put down more money. Discuss the best and highest use of your money with your financial planner.
Closing costs typically average between 3-5% of the purchase price of the home. Prior to putting an offer on a home, your lender will provide you with a worksheet that estimates what your TOTAL costs to close would be – Down payment plus closing costs.