Planning to purchase a home? Make sure you have enough cash. Saving enough money for a 20 percent down payment is just the beginning. CNBC notes that you also need money to cover:
- Closing costs
- Moving expenses
- The first few months’ mortgage payments
And that money should be in addition to having a solid emergency fund.
It might sound like a lot of cash. But Eric Roberge, a financial planner and founder of Beyond Your Hammock, says the biggest mistake potential homeowners make is not socking away enough money to cover all the expenses — both expected (mortgage insurance) and unexpected (leaky roof). Roberge tells CNBC:
“Scraping by is no way to live your life and, although it may feel like it, buying a home will not magically make your life better. Just like anything else, you will get over the new-home feeling and sink back into normal life.”
Saving enough money to afford a home
So, instead of overreaching, try to buy within your budget, and to trim expenses wherever else you can. One way to make sure you have enough money to afford your home is to make sure you cut out all unnecessary expenses.
Money Talks News contributor Marilyn Lewis points out that having a down payment of at least 20 percent can eliminate one major cost:
The more cash you contribute, the more affordable the home purchase becomes. For example, contributing at least 20 percent of the home’s price lets you avoid mortgage insurance, a fee added to your monthly mortgage payments to compensate mortgage investors should you default. Also, the more cash you bring to the deal, the less you need to borrow and the smaller your monthly mortgage payments.
Find more tips in “10 Steps to Shopping for Your Dream Home.”
If you’re a first-time homebuyer struggling to save up enough money for a big down payment, you might need a little help. Your employer might be one unexpected source of such assistance, as we explain in “10 Ways to Pull Together the Down Payment for a Home”:
Some companies, colleges, universities, and state or local governments have programs to help employees with down payments. Ask your human resources department about possibilities where you work.
Finally, have a top-flight credit score can save you money because it helps you qualify for the best mortgage rates. Ignoring your credit score is just one of “7 Dumb and Costly Moves Homebuyers Make.” As Money Talks News contributor Maryalene LaPonsie writes:
If your number is stuck in the basement, use our tips to raise your score as quickly as possible so you can borrow at a favorable rate — it’s worth tens of thousands of dollars.
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