new home owners

Michelle Zambrano | January 6, 2022

For many people, the biggest barrier to home ownership is the belief that you need a lot of money to buy a home.

In reality, the amount needed today is less than you would need to rent an apartment, thanks to various new mortgage programs and low interest rates.

The money you need can be broken down into 2 categories: down payment and settlement costs.

Down Payment

The down payment is the amount of money you are paying "out of pocket" on the purchase and sale contract. 

Your down payment will vary depending on which mortgage program you choose.

The three major mortgage programs are:

Federal Housing Administration (FHA) - 3.5% minimum down payment
Veterans Affairs Loan (VA) - no down payment is required for military veterans who qualify
Conventional - 3% minimum down payment

For example, a $300,000 home would require a down payment of $10,500 for FHA, $0 for VA, or $9,000 for conventional.

Compare this to renting a home where the lease is $2500 monthly. 

In most cases the landlord would want your first and last month's rent, security deposit, plus the realtor's commission. 

That's 4 months rent of $2500 for a grand total of $10,000.

Closing Costs

You can expect closing costs for real estate transactions in New York to be about 6% of the purchase price. 

Where you live and when you close will determine exactly how much you will have to pay. 

Your closing costs may include:

Lender fees - may include origination, discount points, application, underwriting, and processing.
Appraisal fee - an unbiased 3rd party inspection to determine the market value of the property.
Title search and insurance - this insurance protects both the buyer and the lender from losses resulting in defects in the title, such as liens, taxes, and violations from previous owners.
Private mortgage insurance (PMI) or Mortgage Insurance Premium (MIP) - protects the lender from losses should the buyer default with a loan balance over 80% of the market value.
Recording fees and taxes - Local governments charge recording fees and taxes to record the sale of property.

You will need to meet with a lender to get a more precise estimate of your closing costs.

What to Do If You Don't Have Enough Money Saved

It is not necessary to have all the closing costs and down payment available in your bank account.

If you do not have a lot of money available to buy a home, here are some ideas:

Borrow against your Pension or 401(k)
Withdraw money from your Pension or 401(k)
Receive a gift from a relative
Ask the seller to allow you to finance your closing costs
Obtain a grant from a non-profit organization

Down payment assistance programs can provide up to $100,000 which may be used for closing costs or your down payment.

Program requirements vary by type, terms, and location.

Click the button below to find out if you qualify for down payment assistance. It only takes 45 seconds.

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