How much down payment money will I need?
How much down payment you’ll need depends on several factors, including the price of the home, the type of mortgage you get, and customary closing costs for buyers in your market.
In general, you need enough cash in the bank to cover 3 costs:
Earnest money – this is the good faith deposit you make on a home when you submit an offer. The customary amount varies depending on the market, but might range from 1% to 3% of the offer price. If your offer is accepted, the funds are applied toward your closing costs. If not, your earnest money is returned to you.- Down payment – this is the percentage of the home price that you must pay at closing. The more you put down, the lower your mortgage payments will be. Some loans require you pay 10% to 20% of the purchase price. Other loans designed for first-time home buyers, such as an FHA loan, may only require 3% down or less.
- Closing costs – these are fees you must pay at the settlement, such as lender charges, an appraisal, survey, inspections, attorney fees, taxes, title insurance, and any other processing expenses. You should receive an estimate of your total closing costs from your lender, so you aren’t caught by surprise.
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