How much cash do I need to buy a home?
That is a great question! How much cash do you need to buy a home? The answer depends on two primary factors; keep in mind cash needed for a down payment and for loan closing costs.
Down Payment
The required down payment for a mortgage is based off the type of loan program selected.
A Conventional Loan can be used to buy a Primary Residence, Second Home, or Investment Properties. Within this loan structure, the down payment requirement varies depending on they type of property you are buying.
Primary Residence: requires 5% of the purchase price as a down payment for a single family home, 15% down payment for a two-unit home, and 20% down for a 3-4 unit home
- Second home: requires 10% of the purchase price as a down payment
- Investment Property: requires 20% of the purchase price as a down payment for a one-unit home, 25% down for a 2-4 unit home.
First Time Home Buyers or buyers that have hot owned a home in the last three (3) years may qualify for 3% of the purchase price as a down payment with a conventional loan.
FHA is a government insured loan available only when purchasing a Primary Residence. This loan option requires 3.5% of the purchase price as a minimum down payment.
USDA is another government insured loan and does not require a down payment for those who qualify. It can only be used to purchase a Primary Residence and has household income limits. The location of the home also needs to qualify as a Rural Development.
VA loans are government insured loans that most Veterans qualify for. It can only be used to purchase a Primary Residence and does not require a down payment.
Closing Costs
Loan closing costs are determined by multiple variables. Some of these variables include: appraisal fee, tax service fee, closing/escrow fee, lender’s title insurance, endorsements, wire/courier, recording fee, hazard insurance, and county property tax. The list seems long, but at Legacy Mortgage Group we do our best to keep the closing costs to a minimum compared to most other lenders. Due to differences in property locations, taxes, hazard insurance, etc., it’s difficult to estimate closing costs until we have a property address to work with. On average, closing costs with Legacy are 1%-1.5% of the purchase price. A realtor can help negotiate with the seller to cover some or all your closing costs, leaving you with just the down payment to cover.
