Q.
How much do we need for a deposit/down payment?
A.
Between the time you make an offer on the house and the closing, you could lay out tens of thousands of dollars that will be held in a special account -- called an escrow account -- by your lawyer or the seller’s lawyer. The exact amount will vary greatly; it can start from $1,000 for an “earnest money deposit,” when you make an offer of, say, $100,000 for a 20 percent down payment on a $500,000 house. Not all banks require a 20 percent deposit these days, but be aware that if you put down less than 20 percent or even get a deal that offers no down payment, you’ll likely have to pay an additional monthly fee for private mortgage insurance, otherwise known as PMI.
Also, keep in mind that there will also be some other costs besides your down payment before your first mortgage payment is due. These include mortgage application fees, appraisal and inspection fees, and all closing costs, which could total between $5,000 and $15,000.
You need to factor in “cover your butt” costs as well. It’s not enough just to make it to move-in day. The goal is to comfortably afford to stay there. It’s a good idea to keep an emergency reserve of three to six months' worth of expenses so you don’t lose your home if you or your spouse loses a job or is injured. It’s also smart to put 1 percent of your home’s value in a CD or money market account in case of emergency -- for example, if the boiler bursts or the roof needs repair.
-- The Nest Editors
See More: Buying a Home