Realtors in MD: Do You Have Enough Money Set Aside for a Down payment?

Realtors in MD and The North Star Team of Keller Williams Legacy discusses what is needed for a down payment.

A house is a significant investment. Not only do you need to have enough money for a down payment, but you also need cash to cover the closing costs. Do you have enough money saved up for a down payment and closing costs? Here’s how to tell.

What is a Down Payment?

Chances are, you likely can’t afford to pay for the entire cost of a home upfront. However, most mortgage brokers require a large sum of money paid at the beginning of the loan, otherwise known as a down payment. A down payment essentially shows the bank that you are committed to the loan, and that you have sufficient financial resources to manage a large investment.

Although the amount you can expect to pay varies based on a number of different variables, most financial experts recommend paying at least 20%. So if you’re looking for a $200,000 home, you can expect to pay around $40,000 for a down payment. Your mortgage broker may be able to offer you a lower rate, depending on your financial status and credit history.

In most cases, if you put down less than 20% towards your mortgage, you will need to get Private Mortgage Insurance (PMI). This covers the financial institution that gave you the loan, in case you default.

Don’t Forget About Closing Costs

When it comes to buying a new home, most new homeowners are aware of the need to save for a down payment, but there are other costs you need to consider, too. Closing costs are often associated with the sale, covering the work required to negotiate, facilitate, and finalize the home purchase.

Some of the fees associated with closing costs include:

  • Application fee
  • Legal fees
  • Closing fee
  • Credit report fee
  • HOA transfer fee
  • Survey fee

In most cases, closing costs typically amount to around 3–6% of the total cost of the home. To reduce the costs of closing fees, we recommend simplifying the sale process. At The North Star Team of Keller Williams Legacy, we’re here to help our clients navigate the often-complex home sale process, making it as smooth as possible. Of course, if you really want to save as much as possible, buy a home as-is, and pay in cash.

Do You Have Enough?

Not only do you need to cover a down payment and closing costs, but you’ll want to have some money set aside for any unexpected maintenance or repairs, especially if you’re buying a pre-owned home. This is why we always recommend our clients choose a home that is well within their budget, not stretching it.

If you’re looking for a new home in the Baltimore area, give us a call! Our team is here to help guide you through the process. The North Star Team of Keller Williams Legacy is passionate about helping homeowners find the home of their dreams, without breaking the bank.





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