With the vast amount of misinformation circling about, it is not surprising that many potential homebuyers have been lead to believe that they need a 20% down payment, in order to buy a home or move on to their next.

Despite the fact that it has absolutely no merit, this misinformation continues to surface over and over in conversations, online forums, real estate portals etc….  It seems as though, no matter how many times this “20% down payment” myth is dispelled….much like your in-laws it just keeps coming back!!

For the record, there are a great variety of mortgage loan programs available in today’s market, with some of these programs ranging from as little as 3.5% downpayment(0% for VA and certain geographically based loan programs).

All programs do however have different qualification criteria that a borrower and/or the property itself must meet, so it is best to start your home search by speaking with a lender and applying for a mortgage pre-approval.

If you have diligently been saving up for a downpayment and are ready to find your dream home, be sure that you have also thought about and have saved up enough for your closing costs.

Freddie Mac defines closing costs as:

“Closing costs, also called settlement fees, will need to be paid when you obtain a mortgage. These are fees charged by people representing your purchase, including your lender, real estate agent, and other third parties involved in the transaction. Closing costs are typically between 2 and 5% of your purchase price.”

It is not surprising that many first-time homebuyers wish that someone had let them know in the beginning about the amount of closing costs they may incur. With some of the low and/or 0% downpayment programs in today’s market, closing costs could easily exceed the actual downpayment amount.

Closing costs can vary, depending on where you are purchasing, but here is a list of some of the fees/costs that could potentially be included in your closing costs:

• Appraisal fees
• Credit report fees
• Lender origination fees
• Title services (insurance, search fees)
• Tax service fees
• Survey fees
• Attorney fees
• Underwriting fees
• Government recording fees

Is there any way to avoid paying closing costs?

By working with a competent lender and real estate professional at the beginning of the process, you will be able to assess whether or not closing costs might be decreased or deferred. Do however be aware that “no closing cost” mortgages might end up costing you more by way of a higher interest rate, or by wrapping the closing costs into the total cost of the mortgage (i.e.: you’ll end up paying interest on your closing costs throughout the loan term).

The Takeaway

Working with a competent lender and real estate professional early on will enable you to determine how much money you will need for downpayment and closing costs. Otherwise, you may be surprised to find out that you need to come up with thousands of dollars, the day before closing!!

Call or text me today at 727.755.3434 and I would be glad empower you with the right information, in order to have a “no surprise” home buying experience!!