What Are The 2 Major Buckets that you need before buying a home?
When it comes to buying a home, you need to be equipped and educated with the right kind of information so you’ll have the confidence that you need. Having this type of knowledge helps you to become prepared better financially, especially during the closing day. With that being said, let’s talk about the two major buckets involved when buying a home. A common misconception that I get all the time is, Downpayment Cost and Closing Cost are just the same. It’s not. These costs are two different sides of the coin. That’s why in this blog, I will elaborate on what the difference is between these two things.
1. The Downpayment Cost.
First of all, what is the downpayment? Your downpayment is the money that you have to put
up when it's time to buy your home. You don't have to put this money up right away, but you want to have the money because you're going to need it at the closing table.
Let’s illustrate how much money do you need as a Downpayment Cost.
Let’s say, for example, I was buying a $200,000 home under an FHA Loan, The downpayment for a Home under FHA is 3.5% Which means that you need to prepare at least $7,000 if you want to buy a home with FHA Loan.
2. Conventional Down Payment
With conventional downpayment, you need to prepare at least 3-10% of the total purchase price of the home. Sometimes, it could go up to up to 20%, but you don't need to put out the whole 20%.
3. VA Loan
Veterans don’t need to put any money down when it comes to their downpayment.
What’s your next move now?
The first thing you need to do is find a good lender to work with. As soon as you have selected that particular lender, make sure you have an understanding of what your lender’s products are because there are various types of loan products out there that you can choose from. You need to select the best loan products that work for you because some of them might come with higher interest rates.