How much money will I need to buy the house or bring to closing? That’s a great question and one that I hear often prior to even getting pre-approved for a home loan. Each situation is different and the amount will be determined by a variety of factors. The amount can be as little as $0, and then it goes up from there. Here are some guidelines~
A down payment can be used in any loan program. However, there are minimum requirements for each. FHA requires 3.5%, USDA and VA do not require a down payment, and Conventional requires anywhere from 3% to 20%. There are advantages and disadvantages to each loan program based on your individual circumstances.
Closing Costs is a broad term that involve several different fees and costs, most of which are determined and set by other companies and government agencies that are involved in or have in interest in your home.
The biggest amounts are the lender fees, mortgage insurance, title, homeowners insurance, and taxes.
We, as the lender, will charge you a processing fee and underwriting fee which are flat rates and does not depend on the loan amount. Depending on your credit score there may be points added to the loan that factor in the amount of closing costs.
The mortgage insurance will have an upfront fee which is a percentage of the loan amount. This is required of most loan programs such as FHA, USDA, and Conventional. Conventional with 20% or great down payment, and VA loans do not require mortgage insurance.
Title fees are charged by the Title company and will vary by the company and the purchase price of the home. Property taxes are determined by city and/or county. Homeowners insurance will be determined by the insurance company that you choose. The property taxes are paid for the current year remaining and also added to the escrow amount. Homeowners insurance is paid for a full year and also added to the escrow amount.
These costs do not cover everything, but are some of the major factors in determining closing costs and the cash that needs to be brought to closing.
How Can I Bring Less?
The good news is that you can lower the amount of what you need to bring to closing by having the seller contribute up to the percentage allowed by the loan program. This can often mean you will need to only bring the down payment amount to closing – or not much more. Contact me for more information on how I can make this happen for you.