Tag Archives: down payment

The Home Search

11 Friday Nov 2011

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A previous blog post was on how much money you’ll need before you search for a home – basically going through the down payment you’ll need, the money for an inspection or inspections, earnest money, closing costs and the like.  So, you’ve saved the money you need.  What happens now?

First, if you aren’t prequalified already, meet with a Lender and get prequalified.  This will let you know how much you can afford to pay for a home.  Even IF you don’t want to spend the entire amount you can qualify for, you’ll know how high you can go.  The other calculation, then, is at what price point you’ll be comfortable.  Consult mortgage payment tables, which calculate principal and interest at given interest rates, then remember to add in a sum for taxes and insurance.  The four elements of your monthly mortgage payment will be that: PITI, or principal, interest, taxes and insurance.

It’s definitely a good idea to figure this out BEFORE you start looking for homes.  There’s nothing more frustrating than looking at homes way above your price range and then discovering you have to settle for something much less.  Plus, when you do get ready to make an offer you’ll need a prequalification letter.  If you’ve already spoken to a lender, you’ll be able to get one of those quickly when the time comes.

Price often dictates neighborhood – and property type.  If you are in a lower price range, but set on living in Buckhead, for instance, you’ll need to look for a condo or townhome.  Your agent can help you identify, in your range, where it is possible for you to live.  We can then set up a property search accordingly.

We have lots of cool tools these days for that – I can set my buyers up on automatic notification, so that when a new home meeting their criteria comes on the market, they know immediately.  But of course, I also look at the new listings every day, and quiz other buyers about unlisted properties, to determine whether there’s something “new” out there for one of my buyers.

So, you search – and if you have targeted correctly, you might be able to find your dream home relatively quickly.  At that point, it is time to MAKE AN OFFER – which will be the subject of a future blog post… so STAY TUNED!!!

HOW MUCH MONEY DO I NEED BEFORE I BEGIN LOOKING FOR A HOUSE?

20 Thursday Oct 2011

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I try to find some fun, interesting topics for blog posts – this one is a little dry, but important!  I will sneak in a few of these here and there, just for variety – and because, like vegetables, they’re good for us. 


I find that new homebuyers are confused about how much money they should have in hand BEFORE they begin looking for their dream home.  A quick answer is – call your lender !  They can give you a good idea of what price home you can buy, and how much in reserve you should have before you begin looking.  My favorite mortgage lender – the one I use most often and who will do my loan when I purchase a home – is Carlisle Dent of Fidelity Bank Mortgage.  Tell him I told you to call and he’ll be happy to discuss it with you. 


But if you’re just “thinking about it” at this point,  or just want a general idea, here we go:


Generally, the largest chunk of dough you should have in advance is your DOWN PAYMENT.  The down payment varies depending on the type of financing you are using, your monthly payment and the price of the home you are purchasing.   It is a percentage of the purchase price, and that percentage depends on the financing you receive. It is possible to pay as little as 5% down, but in a more traditional situation, you would be putting about 20% down.  Government loans require a smaller down payment – I have seen (even in this tough lending environment!) no money down (from the buyer) loans.  But since the mortgage meltdown, those are very few and far between.  The more you put down, the more lenient your lender can be on underwriting issues.  Plan on no more than twenty percent of the purchase price – but most of my buyers these days put twenty percent down.


Saving enough money for a down payment can seem like an unreachable goal for some. Remember though, if you already own a house, you can use your home equity toward a down payment on a new house. If you are a first time home buyer, start a savings program if you have not already. Also, a lot of first time home buyers receive help from parents and relatives for the purchase of their first time. Consider asking!  It’s a good, effective mode of wealth transfer at a time when you most need it.  If you DO go this route, know that there are special rules relating to when that money needs to come to you.  Some loans will require that the funds are in YOUR account for a certain amount of time.  Check into that FIRST if this is your plan, so that you know you are conforming to those rules. 


Also, some builders of new homes will consider “sweat equity” in their selling price. This means that they will reduce the price and let you do some of the work (like painting) yourself.  There are even more strategies to get your down payment lower, such as using a co-borrower or seller take-backs.