There are countless intricacies to the homebuying process, and although answers online are plentiful, it can be tough to know what information is trustworthy. I’ve helped plenty of first-time buyers through their homebuying process, and in the blog below, I’ll share some answers to the most frequently asked questions I’ve received.
How Much Money do you Need to Buy a Home?
So you want to buy a home but you don’t know how much money you need to bring to the table when you’re starting this process. There’s plenty of information online which states that you need as much as 20% down, but maybe you have a friend who purchased their home with little to no down payment. The question is: how much do you actually need?
The answer isn’t quite as straightforward as you might like it to be, but the truth is that it depends on a variety of factors. This includes location, the type of property you want to buy (house, townhome, condo, etc.), and your own individual financial situation.
In general, you should expect to need at least a 0-5% down payment, as well as closing costs which can average from 2-5% of the sales price. Additionally, try to have enough savings to cover 3-6 months of mortgage payments in case of an emergency. You never know what could happen and it’s always a good idea to be extra prepared in case you find yourself in a pickle.
How Much Money Should You Make if You Want to Buy a House?
Newsflash: buying a house Is expensive. Having a steady stream of revenue should be a cornerstone for every homebuyer. But how much should you be earning if you want to buy a home?
There are four factors that will determine what you can afford based on your financial picture:
The projected payment
Current debts
Qualifying income
The loan program’s debt to income (DTI) ratios
The DTI varies depending on the loan program that you decide to go with. On average, it’s about 45%.
To determine how much you need to earn to qualify for a home’s mortgage, you take the estimated payment and add your current monthly debts. This includes credit card payments, car payments, personal loans, other mortgages, child support, etc. Divide this sum by 0.45 and that gives you the minimum amount needed to qualify.
How Long does the Homebuying Process Take?
Buying a home can take anywhere from a few weeks to several months, depending on how complex the process is. Regardless, it’s best to be as prepared as possible for this life-changing purchase, so the sooner you start the better.
In general, you’ll want to meet with a mortgage lender, like myself, anywhere between 2-6 months before you want to buy. This gives us plenty of time to come up with a plan and make sure you’re ready to shop.
After you’re pre-approved, you’ll likely work with a real estate agent to find the home you want to buy. Once you’ve made an offer, so long as it’s accepted, it usually takes anywhere from 30-45 days until you can close on that home.
There are plenty of factors that can affect the timeline, such as how quickly your loan can be approved, how quickly the seller responds to your offer, and how quickly the inspection and appraisal can be completed.
At the end of the day, the homebuying process can seem complicated to the untrained eye. That’s why it's important to work with an experienced lender and Realtor who can help you navigate the process and make sure everything is done efficiently. If you want to get started with your homebuying journey, or if you have any additional questions regarding the process, reach out to a member of my team! We’re more than happy to help.