Do You Need Money To Buy A Home?

Do you need money to buy at home? I often receive calls regarding one of my listings or just a call in general where the person is interested in buying a home. They have never bought a home before and do not know what is involved or what they need to do. I am always more than happy to help and am excited to help someone who has never bought a home, to get their first home.

In order to help them better I allow them to ask as many questions as they have on their minds and then I begin to ask them some questions to get a better feel for their needs and ability to buy a home.

Once I get into the interview a bit I usually ask them how much money they have to put towards the process of buying a home. So much of the time I am met with shock or even silence. Then often I hear, ‘none’, ‘very little’, or ‘I might have a little in a month or so’. I always feel so sad for these clients because I truly want to help them, but without money it makes the road to home ownership very challenging, if not impossible. I am also very surprised that a person would think that they can buy a home without having any money and sometimes they get angry at me when I suggest that they will need at least some money to proceed.

There are ways if you fall into a low income bracket to obtain bond money if it is available, but even using bond money requires that the buyer invest a certain percentage of their own money into the transaction.

If you are considering buying a home please let me encourage you to start a savings account, no matter how small, to work towards that goal. Click here to read more about the home buying process.

Some of the most common expenses a person encounters in buying a home after making an offer on a home but prior to closing, are the following:

Home inspection - $185 - $250
Termite inspection - $75 - $150
Appraisal - $350 - $450

These are all fees that you will be required to pay before you even get to closing. They do vary from vendor to vendor, but plan for more than you think you will need. Once you get to closing you will be required to pay your down payment and closing costs.

Down payment – FHA - 3.5% of the price of the home. VA - 0.00%, Conventional - varies.
Closing costs – Varies, but could be as much as 5% or more of the cost of the home.

Now having said all of that let me say that in some rare instances some buyers have been able to get into a home with very little, if no money. If you qualify for a VA loan which requires no money down, you are able to negotiate the seller to pay your closing costs and find venders for the inspections who will take payment at closing, allowing their fees to be included in the closing costs, the appraisal will be the only thing you will be responsible for paying up front. If you qualify for bond money which will pay your down payment then the same scenario could apply.

But let me encourage you that most vendors want payment up front at the time service is rendered because if the deal falls through they often don’t get paid. Let me stress at this point that if you have an inspection or an appraisal done you are the one ultimately responsible for paying their fee. If the deal does not close, you STILL owe these vendors for the work they performed.

Each real estate transaction and each person’s individual situation varies, but the more you can save towards the purchase of your first home, the easier the transaction will go and the less it will cost you in the long run. VA loans may allow you to get into a home with 0.00% down, but they have a funding fee that is added to the loan amount, with FHA loans there is MIP which is added on to the cost of the loan, bond money requires an investment of time, where you must agree to live in the home for 5 years or you will have to pay back the money given by them.

One good way to begin saving now is to meet with a lender. Surprising I know, but they can check your credit and tell you the loan amount you will qualify for. They can tell you how much of a down payment will be required and what your monthly payment will be based on the current interest rate. Many people put off going to a lender until the last minute before attempting to buy a home, but the best planning strategy is to get advice from a lender long before you are ready to buy.

Let’s say that you are currently paying $800 a month in rent and you qualify for a home where your new payment will be $1,000 a month. Start preparing by putting that additional $200 a month in your home purchase savings account. When it comes time to make that new payment you will be used to allowing for that additional amount in your budget and it will make the transition much easier.

If it seems overwhelming to save enough for a down payment by only contributing $200 a month, don’t despair. Once you have started the savings account and are regularly contributing to it, you will be encouraged by how quickly it seems to grow. It will build momentum and when you have a little extra during the month you will be excited to put it in there. When you receive additional money from a tax return, a garage sale or some other unexpected avenue, you can put that in there as well and very soon you will have the money you need.

Should you not need all the money you have saved when it comes time to buy a home, you can begin to save towards another goal, because now you have developed a healthy financial habit which will benefit you for life.

Rick and Nancy Jackson

so you will know a little bit more about Real Estate in Oklahoma