MPP's Q&A...“I am ready to buy my first home, but I am not sure I have enough money for the downpayment and closing costs....

Miss Property Professor’s Question of The Day

“I am ready to buy my first home, but I am not sure I have enough money for the down payment and closing costs. I’m not sure what I need or when I need it. I don’t want to go and talk to a real estate agent until I know for sure I’m prepared for all these costs.”

This may be the number one question I receive from first time home buyers; and frankly, the smartest one to be asking! The last thing you want to do is get to closing day and be short on funds to close. It’s not a pretty sight. Therefore, having a great Realtor, loan officer and title representative is critical. I know there are all kinds of horror stories out there about the gazillions of dollars it is going to cost to buy a home (the truth is you’ll spend more when you sell your home) but, just like the term gazillion dollars is an exaggeration, so is the amount of money you will need.  Granted, things can get pricey...but, that doesn’t mean it is necessarily coming directly from your bank account.

Since 1934 FHA has been offering loan programs to help buyers with the “american dream”...home ownership. In 1944, The Veterans Administration followed their lead, doing the same. Since then bond programs have popped up left and right offering down payment and closing cost assistance to everyone from teachers to firefighters, and everyone in between! Upon meeting with your loan officer, you will be able to find out which, if any of these programs you can qualify for. So, given you receive approval on an assistance program...it’s all good! NO $$$ out of your pocket for the down payment.

As scary as it is to go there….closing costs (eeeeeeeek) again, not as bad as the urban legends make them out to be. I’d say in 4 out of 5 purchase contracts, the closing cost can be written into the offer (even if you are using a conventional loan. It’s pretty easy to follow…

Purchase Price: $100k

Estimated Closing Costs: $5k

Offer: $105k (purchase price + closing cost)

Seller agrees to credit back $5k to you for closing costs; bringing the purchase price back to $100k. This covers your closing cost without having to take money out of your wallet up front. Keep in mind this is only an example (in real estate everything is an estimate) until closing day!

So, see there is no down payment demon out there...lol! No closing cost spook! If you are ready to buy, you’ve been to a lender, have your pre-approval and safely ($1,000) in bank reserves...I’d say DO IT!