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How Much Do You Need to Save to Buy a Home?

When planning to buy a home, many people focus on saving for the down payment. But there’s another important part of the financial equation that people shouldn’t overlook: closing costs.

Closing costs are additional fees, many of which are due when the loan closes, hence their name. Closing costs can include lender’s fees for processing the loan, third-party fees like appraisals, and other prepaid expenses that may be required.

The amount required for closing costs can vary based on several factors, including the location of the property, the loan amount, and the purchase price. Typically, closing costs range from 2% to 6% of the loan amount.

It’s also important to know that borrowers are not required to provide a 20% down payment, despite conventional wisdom. Many loan programs allow for lower down payments from 5% to 3%, and maybe even lower in certain circumstances.

“As far as how much you need, talk to your loan specialist,” said Kevin Ramirez, senior vice president of sales training at New American Funding. “And, of course, save money for the closing costs.”

Kevin Ramirez NMLS # 104026