3 Things To Budget For When Saving For A Home
When you’re planning to buy a home in Los Angeles, knowing what to budget for and how to save may sound intimidating at first. But it doesn’t have to be. One way to take the fear out of budgeting is understanding some of the costs you might encounter. And to do that, I’m here as the first step as a trusted realtor to connect you to my preferred and vetted financial lenders who are ready to plan your finances and prepare your budget.
Here are just a few costs you can expect.
1. Down Payment
Saving for your down payment is likely top of mind as you set out to buy a home. But do you know how much you’ll need to save? While each situation is different, there’s a common misconception that putting 20% down toward your purchase is required. Well, that’s not always the case. The right amount depends on your current savings and your home buying goals. As a former mortgage banker, I’m here to say that’s not always the case.
To understand your options, partner with an experienced mortgage broker to go over the various loan types, down payment assistance programs, and what each product requires.
2. Closing Costs
Make sure you also budget for closing cost, which are a collection of fees and payments made to the various people involved in your transaction. Closing costs are the fees you pay when finalizing a real estate transaction, where you’re refinancing a mortgage or buying a new home. These costs can amount to 2 to 5 percent of the mortgage so it’s important to be financially prepared for this expense.
The best way to understand what you’ll need at the closing table is to work with a trusted lender. I have my hyper local preferred lenders who can provide you with answers to the questions you might have.
3. Earnest Money Deposit
If you want to cover all your bases, you can also consider saving for an earnest money deposit (EMD). An EMD is money you pay as a show of good faith when you make an offer on a house. While there is no set percentage, in Los Angeles the average is 3% of the total home price.
This deposit works like a credit. It’s not an added expense – it’s paying a portion of your costs upfront. You’re using some of the money you already saved for your purchase to show the seller you’re committed and serious about their house.
The EMD tells the Seller that you as the Buyer are serious about the purchase of the property. The funds are typically sent to escrow within 3 days of the accepted offer, and go toward the down payment and closing costs. So basically, the earnest money is just paying more of the down payment and closing costs upfront.
Keep in mind, an EMD isn’t required, and it doesn’t guarantee your offer will be accepted however it is standard practice in the Los Angeles real estate market. When you hire me as your realtor I help you to understand what’s best for your situation and any specific requirements in our area. I’m here to help you determine what moves you should make in the homebuying process to have the greatest success.
Bottom Line
Budgeting for your home purchase doesn’t have to be intimidating. Let’s connect so you’ll have an expert on your side to answer any questions you have along the way.
Your neighborhood expert, Stefanie Pollack, has all you need to know about our wonderful community here in the Valley. Visit Stefanie’s Blog to learn more.
Interested in selling your current home or starting the search for your dream home? Call Stefanie today at (818) 625-6171 or book a call at your convenience.