What You Need To Know About Saving for a Home in 2024

If you’re planning to buy a home, understanding upfront costs and budgeting doesn’t have to be intimidating. Trusted real estate professionals can provide guidance, helping you set a strategic plan for your budget before you start the process. Connect with experts for valuable insights and a smoother homebuying experience.

Here are just a few things experts say you should be thinking about. When considering buying a home, experts recommend focusing on several key aspects, including down payment options, understanding closing costs, and being aware of the earnest money deposit. Trusted real estate professionals can provide guidance and help navigate these important considerations for a successful homebuying experience.

1. Down Payment

Saving for a down payment is a crucial step in the homebuying process, but the common misconception that a 20% down payment is required is debunked. The actual amount needed depends on individual circumstances and goals. Consulting with trusted real estate professionals can help buyers explore various loan types and down payment assistance programs to determine the most suitable approach. An article from the Mortgage Reports explains why that’s not always the case:

“The idea that you have to put 20% down on a house is a myth. . . . The right amount depends on your current savings and your home buying goals.”

To gain a comprehensive understanding of down payment options, it’s advisable to collaborate with trusted real estate professionals. They can provide insights into different loan types, discuss available down payment assistance programs, and outline the specific requirements for each. Being well-informed in advance facilitates a smoother homebuying process.

2. Closing Costs

Include budgeting for closing costs in your financial plan, as they encompass a range of fees and payments distributed among the parties involved in your real estate transaction. According to Bankrate, closing costs typically amount to 2 to 5 percent of the mortgage, underscoring the importance of financial preparedness for this expense. Consulting with a trusted lender can provide detailed information about what to expect at the closing table. Bankrate explains:

“Closing costs are the fees you pay when finalizing a real estate transaction, whether you’re refinancing a mortgage or buying a new home. These costs can amount to 2 to 5 percent of the mortgage so it’s important to be financially prepared for this expense.”

Collaborating with a trusted lender is crucial for gaining a comprehensive understanding of the financial requirements at the closing table. A reliable lender can address any queries you may have and provide detailed information to ensure you are well-prepared for the closing costs associated with your real estate transaction.

3. Earnest Money Deposit

To comprehensively prepare for the homebuying process, it’s advisable to consider saving for an earnest money deposit (EMD). Typically ranging between 1% and 2% of the total home price, the EMD serves as a demonstration of good faith when submitting an offer on a property, reinforcing your commitment to the purchase. While an EMD is not mandatory, consulting with a real estate advisor can help determine its suitability based on your circumstances and local requirements. They will guide you in making informed decisions throughout the buying journey.

The earnest money deposit (EMD) functions as a credit rather than an additional expense. It involves utilizing a portion of the funds you’ve already saved for your home purchase upfront. This payment serves as a demonstration of your commitment and seriousness to the seller when presenting an offer. Realtor.com describes how it works as part of your sale:

“It tells the real estate seller you’re in earnest as a buyer . . . Assuming that all goes well and the buyer’s good- faith offer is accepted by the seller, the earnest money funds go toward the down payment and closing costs. In effect, earnest money is just paying more of the down payment and closing costs upfront.”

An earnest money deposit (EMD) is not obligatory, and its payment doesn’t guarantee acceptance of your offer. It’s crucial to collaborate with a real estate advisor who can guide you in understanding the best approach for your circumstances and any particular stipulations in your local area. Their expertise will help you make informed decisions throughout the home-buying process.

Bottom Line

When buying a home, being informed about what to save for is key. Let’s connect so you’ll have an expert on your side to answer any questions you have along the way.