How much cash do I need to buy a home?

DOWN PAYMENT

Over one-third of first-time home buyers made a down payment of 5% or less of the purchase price
More than half of home buyers had credit scores of 600-749
Minimum down payment for an FHA mortgage is 3.5% of purchase price, most conventional mortgages require at least 5% down but some programs are available with a 3% down payment
Down payment assistance programs are available, with income limits higher than you might expect (such as $68,650 for a single person in Minneapolis-St. Paul with some programs)
CHECK WITH A LENDER to discuss the best program for you and your situation
- Sharmain Tesmer, Wells Fargo Home Mortgage (612-667-7129) – special Wells Fargo programs in conjunction with city programs can enable to buy a home in Minneapolis & St. Paul with as little as $1,000 of your own money
- Leslie Vanderwerf, American Mortgage & Equity Consultants (651-200-6556) – misc local grants and loans to supplement your own cash for purchases throughout the metro
- Molly Zimmerman, Bell Mortgage (763-222-1546) – 3% down conventional financing
Your down payment is due at closing

CLOSING COSTS & PREPAIDS

Closing costs include such things as title search and title insurance, mortgage registration tax and recording fees, settlement closing fees
Prepaids include mortgage interest and taxes from date of closing to the end of the month, as well as money to 'seed' your escrow account for paying future taxes and homeowner's insurance when payment is due for next year
Closing costs are due at closing, usually about 3.5% – 4.5% of purchase price
Buyers can ask sellers to contribute to this cost, usually a maximum of 3% of the purchase price

EARNEST MONEY

You will need to submit an earnest money deposit of usually at least $1,000 or 1% of purchase price once you have come to an agreement to purchase a home… required by law to be deposited within 3 business days of coming to an agreement
These funds apply to your final purchase and are held in the listing broker's escrow account for you until closing
Your earnest money will be refunded to you if you cancel your agreement following your inspection or if you cannot obtain financing

HOME INSPECTION

Most buyers have their purchase subject to an inspection, which is at buyer's own cost
Budget about $400-$500 for a complete home inspection, payable at time of inspection (may be payable by credit card)
If your inspection also includes a radon, sewer or fireplace inspection budget about $150 for each additional inspection
Costs vary by inspector, as well as size and age of the home… these are only ballpark estimates

APPRAISAL

Once your home has passed your inspection, your lender will order an appraisal to ensure its value is at least what you have agreed to pay
This payment is due when the appraisal is ordered, usually payable by credit card
Budget about $400-$500… again, ballpark estimate

HOMEOWNER'S INSURANCE

You are required to pay for your first year of homeowner's insurance before or at time of closing
Many buyers include this cost as part of funds brought to closing
$1,500… ballpark estimate

SUMMARY OF ESTIMATED TOTAL CASH NEEDED TO BUY A $220,000 HOUSE

Down payment – $7,700 for FHA (as little as $1,000 with Wells Fargo down payment assistance programs for Mpls homes)
Closing costs & prepaids – $8,000 ($1,400 with 3% seller contribution)
Inspection – $450-$750 (optional)
Appraisal – $400-$500
Homeowner's insurance – $1,500

Don't forget to also budget for moving costs, and the inevitable items you will need to maintain your new home and make it your own.

Sharlene Hensrud, RE/MAX Results – Twin Cities Realtor