Are you ready to take that big step? You know, the one that starts you on the road towards your version of The American Dream?
It’s a big step. But before you start to scour the internet for your dream home, you need to think about something. And that something is the down payment. And don’t forget the closing costs.
Do you know how much you will need? Let’s do the easy one first, the closing costs. If you are getting a mortgage, your closing costs will probably be between $8,000 to $10,000. Without a mortgage it will be less. There may be a way to get the seller to pay some or all of the closing costs. To discuss that call me, Art Reiman, Realtor, at 732-598-7700.
Now let’s look at the down payment. The traditional down payment is 20% of the purchase price. There are other programs where you can pay less than 20%, and many buyers do just that. There are mortgage programs where you can put down as little as 3.5% of the purchase price. The median down payment these days is 6%. And if you are eligible for Veterans Benefits, you won’t need any down payment, just the closing costs.
It you purchase a home for $300,000, a 20% down payment is $60,000. A 3.5% payment is $10,500. So where will you get that money. Many first time buyers go to the First National Bank of Dad. But if you parents can’t, or won’t give you the down payment, you will need to come up with the funds some other way.
Do you have an IRA? If so, you may be able to withdraw up to $10,000 penalty-free to use towards your first home. Some counties offer a first time buyer grant, but these have many restrictions. You may have to do it the old fashioned way, save the money over a period of time. However you need to do it, starting today is good. Starting yesterday would’ve been better.
Here’s a rather radical idea to get the down payment money. Do you really need two kidneys?