Buying a house: how much liquid cash is NEEDED?

[DLgal]

We are looking to purchase our first home in around 2 years from now, hopefully.

My question is, when buying a home with NO DOWN PAYMENT, how much cash is required anyway, in order to purchase a home? I know there are things like closing costs, fees, inspections, etc? What I need to know is, how much does all of this stuff cost, as a percentage of a home's sale price? We need to know if it will even be possible for us to do this, or will we have to continue renting for the next several years.

Right now, we have $0 in savings for a home, but we will be actively saving from this point forward, as aggressively as necessary. Up until now, all our savings is in the form of 529 plans for our two kids, Roth IRA for me, and my husband's retirement account. Buying a home has not been a priority so we have put all our available money into these other accounts.

I will mention, we ARE eligible for a $0 down home loan through the VA loan program, so that is how we are planning to do this.

 

[KennesawNemo]

We are looking to purchase our first home in around 2 years from now, hopefully.

My question is, when buying a home with NO DOWN PAYMENT, how much cash is required anyway, in order to purchase a home? I know there are things like closing costs, fees, inspections, etc? What I need to know is, how much does all of this stuff cost, as a percentage of a home's sale price? We need to know if it will even be possible for us to do this, or will we have to continue renting for the next several years.

Right now, we have $0 in savings for a home, but we will be actively saving from this point forward, as aggressively as necessary. Up until now, all our savings is in the form of 529 plans for our two kids, Roth IRA for me, and my husband's retirement account. Buying a home has not been a priority so we have put all our available money into these other accounts.

I will mention, we ARE eligible for a $0 down home loan through the VA loan program, so that is how we are planning to do this.

I am currently buying a house and I found I underestimated the cost a little bit in the beginning.

Closing cost will be a big chunk of cash. It really depends on how much you need to borrow. I just had this lesson yesterday. I was about to borrow 80% of the purchasing price, but was told that amount put me in the "jumbo loan" category, for which my closing cost would be $7k higher and my interest rate would also go up by 0.3%. You could write the closing cost into purchasing price, but there is the risk that the house won't appraise that much so you can't get a loan for that much.

There will be inspection cost and I walked aways twice after the inspections, because both revealed big issues with the houses. Each inspection cost me $525, including radon and regular inspection. So, I was $1k down in cash and without a house. Also, for certain houses, there are other inspections, like mold inspection, stucco inspection.....

There will always be things to be fixed with the house you are about to buy. Paint, rotten wood, broken door/window....Some you could ask the seller to fix, some you'll have to do it yourself.

I will also hire someone to deep clean the house before I move in, no matter how clean it already looks, but that's just me.

Oh, another thing I have not counted into the cost. Both of us work and we are tring to buy in a seller's market. The only way you get a house is to see it the very first day it is listed. So a lot of the times, we got off work, went to see the house, had discussion with our realtor and it would be 8pm by the time all was done. We found ourselves too tired to cook so we ate out a lot more during those months and it definitely added up!

 

[lost*in*cyberspace]

Both my husband and I are eligible for VA loans, but haven't used them to buy a house. You might be surprised to know a lot of sellers won't accept VA loans.

It's impossible to answer your question with any accuracy, as it all depends on the price of the house and the deal you work out with your seller.

 

[Cheshire Figment]

This will vary a lot depending on both the area where you live and the cost of the house. I would suggest starting to search for a RE Agent now, and as part of the interview ask what they think closing costs would run you.

 

[hlg22]

It really varies, and it's possible you could even get the seller to agree to pay some closing costs, if you're in an area where it's a buyers' market. Your closing costs will include not only things like inspection, recording fees, etc., but also prepaid things like insurance, interest for the # of days before the first of the month, etc. If you talk to a mortgage broker, he or she can run the numbers for the price point you're looking at, and give you an estimate of closing costs.

I would also caution to make SURE you also have a several-month emergency fund before buying a house. I know many people who had big ticket items unexpectedly need to be replaced shortly after moving into a new home - things like water heaters, A/C, etc. Nothing that could have been caught on the home inspection, just total flukes.

 

[laurafergie]

Like PPs have said, it will vary where you live and the market there.

But we have purchased using my DH's VA. Right off the top of my head....Ernest Money when you make an offer, like $1000+. Home inspection, $500+, termite inspection $100+. Appraisal $400+ Closing costs, BUT depending on your market, you can ask for the sellers to pay these, and they are regulated by the VA.

Don't forget any appliances you may have to purchase, any remodeling, even if it is just paint and carpet that has to be done right away, and moving costs.

 

[garnetandblack]

The bank will want you to have several months reserve - I would assume at least 3 months worth of mortgage payments.

You might be able to get the seller to pay closing costs, if not expect 3% of the purchase price. Then expect about $1,000 in inspections.

I would also suggest having at least a 6 month emergency fund set up before purchasing a house.

Forgot to add earnest money - at least $1,000 but this will be credited towards your closing costs.

 

[kayemgi]

As others have said, it will depend on the price of the house you choose, your area, and also the mortgage lender you choose. We saw huge variations in closing costs with different banks, so make sure you shop around.

To give you an example with numbers, we are buying in the Philadelphia suburbs, ~$170k purchase price, and we are going to need about $12k cash for the closing costs. Roughly half of that is for our small down payment. We are using a large, national bank to get our mortgage. The mortgage lender wants to see in our finances that we can cover that, plus proof of income that we can cover our mortgage payment along with all of our other bills.

Good luck!

 

[Darcy03231]

The bank will want you to have several months reserve - I would assume at least 3 months worth of mortgage payments.

You might be able to get the seller to pay closing costs, if not expect 3% of the purchase price. Then expect about $1,000 in inspections.

I would also suggest having at least a 6 month emergency fund set up before purchasing a house.

Forgot to add earnest money - at least $1,000 but this will be credited towards your closing costs.

In our area you typically have to put down 5-7% of your offer as earnest money. I've never heard of any seller accepting $1,000 down.

 

[DLgal]

Okay, couple of questions.

First of all, why would a seller care if it's a VA loan? The bank issues the loan, and the seller has nothing to do with that.

Second, what is "earnest" money? Is this like a deposit? Do you get to apply that money towards all these costs when your offer is accepted? Do you get it back if you don't decide to buy the house or the offer is not accepted?

Moving costs are not an issue. We are still going to be active duty military, and they will be moving us.

Also, the reason why we want to do $0 down is so that we can have a cash cushion for unexpected expenses after buying (appliances, repairs, etc.)

We are looking to purchase in a market where our home would cost approx. $500k.

 

[LJSquishy]

Closing costs are usually around 3%, and sometimes the seller will agree to pay your closing costs. You will have to pay for a home inspection which is about $500-$1000, sometimes an appraisal $400 (about?), the loan origination fee, credit check, etc.

Now, some things that come up can be rolled into your house purchase price. Other things like the home inspection cannot. In all reality I would make sure you have at least $5,000 saved up...bare minimum. If you don't end up having to spend all of it up front, that is great. Don't forget to save up for items you may need immediately after moving in like a lawn mower! That was our first purchase after we got the keys to our house.

 

[airsdaddy]

Just used a VA loan to buy our first house less than 2 years ago.

Here's what we had to have:

Home inspection (somewhere between 300 and 500...can't recall)

$1000 in earnest money (yes, that was plenty for them).

That was it for us. Our offer included the bank (foreclosed house) paying up to $5k in closing.

The best possible thing you can do is get a great Real Estate agent who will work to get you the best possible deal.

I got my $1000 back at the end, as the $5k was plenty for closing and all of the other fun stuff involved.

 

[airsdaddy]

Okay, couple of questions.

First of all, why would a seller care if it's a VA loan? The bank issues the loan, and the seller has nothing to do with that.

Second, what is "earnest" money? Is this like a deposit? Do you get to apply that money towards all these costs when your offer is accepted? Do you get it back if you don't decide to buy the house or the offer is not accepted?

Moving costs are not an issue. We are still going to be active duty military, and they will be moving us.

Also, the reason why we want to do $0 down is so that we can have a cash cushion for unexpected expenses after buying (appliances, repairs, etc.)

We are looking to purchase in a market where our home would cost approx. $500k.

I know a seller who won't take VA loan buyers. His reason is because he is trying to sell the house as is, and the VA will require fixes before they will fund the loan.

Earnest money is much like a deposit, and is a way for them to see that you are a serious buyer. If you have money on the line, things are less likely to fall apart. And yes, it can be applied to some of the costs. If deal isn't accepted, you'll get it back.

In my previous post, I should have mentioned that my house was only 100k and that I was fairly lucky that everything just kinda worked perfect.

 

[taitai]

I am not an expert but doesn't the VA have a limit? $417K? So, if your house was $500K then you would have to pay 25% of the difference or about $21K. I could be wrong on this though. Should check on that.

Inspection - $1K
Closing costs - 3%
Insurance -??
appliances- ??
remodeling - ??

Then money for all the things that are probably covered under your rent right now....utilities, trash removal, HOA fees (if applicable), lawn care, snow removal, etc. Need to factor those into your monthly nut in addition to the mortgage payment.

Good luck

 

[DLgal]

I know a seller who won't take VA loan buyers. His reason is because he is trying to sell the house as is, and the VA will require fixes before they will fund the loan.

Okay, thank you for clarifying.

We would never buy a house "as is". No way. No short sales or Foreclosures for us! We are NOT fix it upper people, and we are going to be very picky about a house. I refuse to buy one that requires much more work than new paint colors on the wall and maybe new carpeting.

This whole thing makes me nervous. I am all for continuing to rent, as it is so painless, but DH is pushing to buy a house after our next (and final) PCS move in 2015. Sigh.

 

[scrapquitler]

We are looking to purchase our first home in around 2 years from now, hopefully.

My question is, when buying a home with NO DOWN PAYMENT, how much cash is required anyway, in order to purchase a home? I know there are things like closing costs, fees, inspections, etc? What I need to know is, how much does all of this stuff cost, as a percentage of a home's sale price? We need to know if it will even be possible for us to do this, or will we have to continue renting for the next several years.

Right now, we have $0 in savings for a home, but we will be actively saving from this point forward, as aggressively as necessary. Up until now, all our savings is in the form of 529 plans for our two kids, Roth IRA for me, and my husband's retirement account. Buying a home has not been a priority so we have put all our available money into these other accounts.

I will mention, we ARE eligible for a $0 down home loan through the VA loan program, so that is how we are planning to do this.

May I make a suggestion? Find out if one of your area Adult Education programs offers a first time home buyers seminar. I took that 'class' for four sessions, there were sessions with: a realtor, a home inspector, a mortgage broker, and a real estate attorney and they each talked about the process of buying a home. It was the BEST thing I did in preparing to buy our home.

ETA: I highly suggest taking this sort of class or speaking to a local realtor or someone IN YOUR AREA about this. Based on a lot of things I've read online, buying a house is a VERY localized thing, and the customs and laws in various states and areas within states vary a LOT.

As for the things I remember needing cash for when we bought our house: six months worth of property taxes(paid up front at closing), the first year's worth of property insurance (paid prior to closing), attorney fees, $ for the oil in the oil tank (if you are buying a home with oil heat), any local real estate transfer taxes, premium for PMI if you need that, money for down payment/security for transfer of utilities if that is typical in your area, the inspection and any additional inspections you might need (we had a separate inspection of the air conditioning unit, and a separate radon inspection, inspection of the septic system and a separate well water testing). Oh, and the first months interest on the mortgage.

I think in all, that stuff above cost us almost $10K. Obviously that will vary by your local area and the price of the house, the biggest variable is probably the local property taxes.

Also consider how much movers will cost you (or rental of a moving truck, etc). I wouldn't want to attempt to move with out several thousand in liquid cash for incidental expenses that will inevitably pop up while you are moving...you might find you need things that you didn't have in your previous home (lawn care equipment was a big one for us...we had to buy a mower and a week wacker and a hose and things like that, which we didn't think about ahead of time).

 

[Disneyhayes]

Like others have said...it depends on where and how much. We live in Columbus, OH. We are getting our house for $146,900 and the seller is paying up to $3000 in closing costs. We put $1000 of earnest money down. We get the money back as long as we don't back out for any unethical reason (we can't just change our minds).

Our inspection was $470 - this was home, termite and radon

Our yearly insurance will be $472 - We have to pay this at closing for the 1st year.

FHA requires us to put down 3.5%

Our banks closing costs are $2200-$2800 depending on final price.

 

[DLgal]

I am not an expert but doesn't the VA have a limit? $417K? So, if your house was $500K then you would have to pay 25% of the difference or about $21K. I could be wrong on this though. Should check on that.

Inspection - $1K
Closing costs - 3%
Insurance -??
appliances- ??
remodeling - ??

Then money for all the things that are probably covered under your rent right now....utilities, trash removal, HOA fees (if applicable), lawn care, snow removal, etc. Need to factor those into your monthly nut in addition to the mortgage payment.

Good luck

No, the VA does Jumbo loans too. In the area we are looking to buy, the VA will do up to an $850K loan with $0 down. It's County dependent. Certain high cost of living counties have higher VA loan limits.

Right now, we are renting a house, and we are responsible for all our utilities and lawn care. The rent covers HOA fees (which cover trash removal). Snow removal is done by the state.

We are looking to buy in CA, and will likely choose a condo/townhouse where the HOA will cover lawn care and common area maintenance. We don't want a yard! And, it will never snow there.

 

[pocomom]

There are other things VA loans won't cover too, just so you are aware. We had one for our first home and we couldn't purchase a property because it was off a private gravel road. I know someone else who couldn't purchase a property because it was older and in good repair but there was some issues with easements? Good to check the requirements first before you look so you don't get your heart set on a property you can't get.

As far as how much you need, whatever figure you come up with add more! There are so many expenses that first year in a new home- some like paint can be put off, but there are many you'll want or need. Our first home we need a deposit for our electric company for them to turn it on, or home didn't even have a light bulb in it... blinds, curtains, hardware, there was always something we were running to the store for!

 

[DLgal]

Just to clarify further, I think we can comfortably save up at least $40K, possibly up to $75K if we rent for an additional year rather than buying in 2015.

I had read something that said you should have 5-7% of a home's selling price stashed away in the bank for "expenses" related to buying a home, independent of a down payment, and that seemed really high to me, so that is why I've asked this question.

Assuming a $500k house, we would really need $25-30K JUST to get the keys?

Seems like a lot.