It’s a funny question but one often asked – how much money is needed to buy a house? It’s not just a matter of what the monthly payment will be, you also need to know how much you’ll need for the down payment and closing costs.
Contacting a loan officer is an important first step you will need to take when making the decision to buy a home, since there are many options available. Discussing your situation with a loan officer is the best way to be able to make your plans.
COMMON FINANCING OPTIONS:
- FHA, VA and USDA loans
- Rural Development loans
- Fixed- and adjustable-rate loans
- Construction to permanent financing
- Renovation loans
- Jumbo loans
- Condominium loans
Low down payment options:
FHA financing is a good option for first time home buyers. It allows for a 3.5% down payment but does have an up-front fee and a fee for insurance is added to the monthly payment. Qualifying can be less stringent since this is a government insured loan.
VA financing is only available for home buyers who served in the military, and requires no down payment. There is an upfront fee and monthly insurance premium added to the payment.
Rural Development (USDA) financing allows for 0% down, but is only available in areas that are considered “rural”. In our area, there are some locations in south Oconee County but more properties that qualify are in Madison and Oglethorpe Counties.
Other financing options:
Conventional fixed and adjustable rate loans: These range from a required 5-20% down payment. With interest rates at an all time low, most borrowers are choosing a fixed rate, but there are times that an adjustable rate could be beneficial. This option may be advantageous to a buyer who is only planning to stay in the home for a few years.
Construction to permanent financing: The construction loan is a short term loan to get your new home built. When it’s complete, the lender will convert the loan to permanent financing. After a home is complete, there is no requirement to remain with the same lender for permanent financing.
Renovation loans are available if you already own the home. If renovations are needed when you buy the home, FHA-203K financing may be a good option. The lender has contractors who will give prices for the repairs. The repairs will be made within a certain time after closing and contractors paid. The amount paid will be added to the loan.
Jumbo loans are offered at a slightly higher interest rate for homes priced at $424,100 or above.
Condo loans have different guideline, based on the number of owner occupants in the condo complex.
How much money is needed to buy a house?
Saving for a down payment can make a difference in the type of financing you’ll have available for your home purchase. Along with the down payment, there are closing costs that need to be covered.
FHA, VA and Rural Development (RD) financing offer a low (or no) down payment but the monthly payment will be higher because of the mortgage protection insurance (MPI). These are government insured loans.
You can see there is no one answer to how much money is needed to buy a house. The first step of contacting a loan officer will get you started in the right direction.