Are you considering buying your first house? You are probably wondering how much money you will need to invest in your first home.
While, each mortgage program is different and the money you will need also depends on the house you buy, I can break things down for you to give you an idea.
In most cases, there are three major expenses that you will need to include in your calculations: Earnest money, down payment, and closing costs.
Earnest money is essentially a deposit upon making an offer. This deposit displays how serious you are in buying the house. This money will go towards your closing costs and/or down payment at closing. However, if you decide to walk away from the contract (in a way that is not supported in the contract) this money could be disbursed to the seller. Feel free to ask me for more information on how to protect earnest money when making an offer.
How much? This varies greatly in different markets. In Rockingham county, it somewhat depends on the purchase but between $500 and $2,000 is common. One way to strengthen your offer is by offering higher amounts of earnest money.
The down payment really depends on the type of mortgage you go with. This is best explained in detail by a mortgage adviser, contact me for my recommendations.
At the moment, you can get a house with as little as 3% down. If you don't put 20% down on a house, you will likely pay PMI (Private Mortgage Insurance) until you have 20% equity in the house.
Again, closing costs can vary. In Virginia, the Realtor fees are paid by the seller. The buyer is responsible for paying the costs associated with processing the paperwork. This can be around 3-4% of the purchase price. However, talk to a mortgage adviser for a better estimate given your price range.
Buyers commonly ask for sellers to cover closing costs as part of the negotiation. Keep in mind that this expense directly affects what the sellers net.