The total sum required to purchase a new home depends on a number of factors, including the cost of the house you intend to buy and the type of mortgage that you get. In most cases, you need enough money to bear the three main expenses of:
- Earnest Money – This is the deposit that is made on the home when making an offer to show the seller that you are serious about buying the house.
- Down Payment – This is a percentage of the cost of the house that you must pay when you want to book the place and start the settlement process.
- Closing Costs – These are the costs associated with processing the paperwork to buy a house.
When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be used to pay the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. Closing costs average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you can be well prepared to bear the expenses.