How Much Money Will I Have to Come Up With When Buying a Home?
Setting back enough money is a crucial part of buying a new home. Below is a summation of the costs associated with closing a deal.
Earnest Money Deposit
Earnest money deposits are used to ensure the seller that the prospective homebuyer is serious about their offer. The deposit amounts vary, but are usually around $1000 Min in Kingston. If the sale goes through, the deposit is added toward your downpayment. In the case that you back out unexpectedly, the money is lost to the seller.
Down payments are the most expensive up front costs when buying a home. Some lenders will allow you to go as low as 5% on your down payment, but the ideal rate is around 10-20%. The higher your downpayment, the lower your future mortgage payments, so putting down as much as you can is important.
Closing costs are different from down payments, and can run higher than earnest money deposits. The closing costs include title insurance, taxes, property inspections, etc. Closing costs range from 2-5% of the purchase price.
While you will be able to keep this money, you will still need to have it available to show the lender you are capable of making payments toward your mortgage. Expect to have 2-3 months of your mortgage payments in an easily liquidated source.
You will also need to factor in homeowner’s insurance and moving costs, which both vary greatly depending on the size and location of your new home. Every agreement is different, but expect to have at least 10% of your home’s purchasing price available before you make an offer. For more detailed information.