According to the 2009 National Housing Pulse Survey, an annual survey published by the National Association of Realtors, having enough money for down payment and closing costs is considered by most Americans to be the biggest obstacle to buying a home. Even with a great credit score, it is possible to not be able to purchase a home due to lack of funds for down payment and/or closing costs.
Down Payment Costs
Ideally, you should have 20 percent of the home’s purchase price saved for a down payment. However, there are public and private loan programs you may qualify for that require a much smaller down payment. Be aware though that with a down payment less than 20 percent, you may have to pay for private mortgage insurance (an insurance policy that protects the lender in the event you default on the loan). Private mortgage insurance typically adds 0.5 percent of the loan amount to your mortgage payments for the year. On an $180,000.00 mortgage, your private mortgage insurance (PMI) would cost $900.00 annually ($75.00 per month).
Closing costs are additional expenses that you may have to pay to “close the deal” and transfer the property from the seller to you. Closing costs can run anywhere from two to five percent, or more, of the purchase price. These additional expenses include, but are not limited to:
- origination fees
- discount points
- appraisal and survey
- flood certification
- title search and insurance
- recording fees
- city/state and real estate taxes
- credit report
- document preparation, underwriting and attorney fees
- prepaid interest
- hazard, flood, and private mortgage insurance premiums
- escrows for future taxes and insurance premiums
As a homeowner, there are other expenses you will need to pay long after the home buying process. You also need to consider costs related to maintaining and repairing your home, such as a leaking roof, broken heating/cooling system, plumbing repairs , etc.
The Department of Housing and Neighborhood Preservation has programs available to help eligible homeowners who cannot afford necessary repairs and improvements. For information about these programs, click here
||Your credit history plays a key role in obtaining a mortgage loan. Learn how to obtain your credit report.|
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||An educated buyer makes for a successful homeowner. Find out where you can learn more about the home buying process.|