Budgeting to Buy a New Home

Are you thinking of buying a home but don't know what to budget for it? Or how to save money for the purchase?  To be able to properly budget, you'll need to understand some of the costs you might encounter.  

Here are some costs you can expect.

Down Payment

Saving for your down payment is probably the first thing you think of as you contemplate buying a home. But do you know how much you’ll need to save? While each situation is different, there’s a common misconception that putting 20% down toward your purchase is required. That is a myth, or at least it's a truth that didn't exist when your grandparents were buying a home!  The right amount to save and put down on a home depends on your current savings and your home buying goals.  What you will need:

Closing Costs

Make sure you budget for closing costs, which are a comprised of fees and payments made to the various people involved in your transaction. These fees vary by transaction and by the lender you use to get your mortgage. They usually are 2-5% of the mortgage, so it can be a hefty expense.

Earnest Money Deposit

An EMD is money you pay as a show of good faith when you make an offer on a house. In Massachusetts, you usually will be asked to put down $1,000 with your initial offer to purchase.  After the inspection period, when you sign the actual Purchase and Sale (P&S) Agreement, there will be a second deposit required. Most sellers will look for a total of 5% or more of the purchase price to be paid with the offer and P&S amount combined.

This deposit works like a credit. It’s not an added expense – it’s paying a portion of your costs upfront. You’re using some of the money you already saved for your purchase to show the seller you’re committed and serious about their house. 

This EMD doesn’t guarantee your offer will be accepted but in general if you make a good deposit you stand a better chance.

Bottom Line

Let us put our years of experience and our connections with superior lenders to work for you, to help you get that dream home!