Buying a house: how much liquid cash is NEEDED?

[mebbradley]

We just bought our house in January using a VA loan for around 155,000.

We had about 1,000.00

500 for earnest money
500 Home inspection.


We got about 300.00 back from closing, we had 6,000 dollars in closing help.

 

[PlutoPony]

As a home seller, if I had a choice between accepting an offer with a VA loan and one with a conventional package I'd avoid the VA loan without a doubt. I'd even consider taking an offer for a little less money over the VA. In my admittedly limited experience, the inspection is a total PIA. With a normal inspection you negotiate with the buyer on what should be fixed, and in most cases concentrate on anything major that comes up i.e. roof, heat/ac, foundation. With a VA loan there's no negotiating (unless things have changed dramatically) and every.single.little.thing has to be fixed - and fixed to very specific standards. Very tedious.

That said, as has been mentioned, much about home buying varies by region so get to know what the business practices are in YOUR area - that's all that matters. But if the market is as a PP from SoCal mentioned and you're competing against all cash investor offers, don't be surprised if a VA Loan is a bit of a drag from an offer standpoint.

 

[ekatiel]

As a home seller, if I had a choice between accepting an offer with a VA loan and one with a conventional package I'd avoid the VA loan without a doubt. I'd even consider taking an offer for a little less money over the VA. In my admittedly limited experience, the inspection is a total PIA. With a normal inspection you negotiate with the buyer on what should be fixed, and in most cases concentrate on anything major that comes up i.e. roof, heat/ac, foundation. With a VA loan there's no negotiating (unless things have changed dramatically) and every.single.little.thing has to be fixed - and fixed to very specific standards. Very tedious.

That said, as has been mentioned, much about home buying varies by region so get to know what the business practices are in YOUR area - that's all that matters. But if the market is as a PP from SoCal mentioned and you're competing against all cash investor offers, don't be surprised if a VA Loan is a bit of a drag from an offer standpoint.

This was not our experience with the inspection. In fact, our seller refused to fix ANYTHING, instead, he "threw in" washer/dryer/fridge (none of which we needed, but we were able to sell) as compensation for any problems that came up in inspection. There were not any major things that came up, but we had no problem with our VA loan. I don't even remember the VA being involved with the inspection on any of our three VA loans. Not sure where you're getting your info. from. --Katie

 

[DLgal]

I am in Southern California so maybe I can help you.

You will need the pro-rate share of property taxes. Assuming the house you buy at 550K has no Mello-Roos, special assessments, etc., annual property taxes will be at least 5500 (1% of purchase price). You will need to come up with the pro-rata share of it at the time that you purchase the house. Taxes are paid in December and April for the property tax year (so this property tax year, taxes were paid in December 2012 and April 2013). December's payment covers July 1st to December 31st. April's payment covers January 1st to June 30th (runs on a July 1st to June 30th fiscal year). If you close in April, you'd be responsible for paying from the date you closed (let's say April 15th to June 30th).

Assuming there are special assessments, those can be another 3-5K (these special assessments/bonds pay for various county/city projects).

So, for property taxes alone, I would try to save at least 5K.

Home inspection is about 300-500.

Homeowner's insurance - that has to be paid one year in advance and you will have to provide proof of it before escrow will close. Since you're looking at a condo or townhome, you need to make sure you can get a policy with your company. I assume you have USAA and I think they cover it, just make sure they know the policy is for "walls in" [since the outer walls should be covered by the association.] Based upon the price of the property, I'd estimate that to be about $1200-1500 (a friend bought a 400K house and has USAA insurance and his insurance costs about $1400).

I also think one month of mortgage payments (or at least the interest) was due.

As I recall, he had to come up with about $10,000 for closing costs (this includes the $2500 earnest deposit which was applied to the escrow costs), which included the pro-rate payment of property taxes, his share of escrow fees, one month of mortgage (or at least the interest), etc. I think he ended up with a refund at the end of $1000-2000. Remember, escrow companies estimate high so they don't have to come back and ask you for money.

This is a very helpful response. Thank you!

Yes, we do have USAA for all our banking/insurance needs.

We are very familiar with the different taxes in the area we are looking to buy. We actually lived there for many years and that is why we want to return and buy there.

 

[DLgal]

You are looking in Southern California. You must be aware that you will be competing with investor all cash offers. The SoCal real estate market is being driven by these cash investors and it is keeping many locals from being able to afford homes. With regards to your projected monthly costs, $4000 - $5000 would get you your home, insurance and taxes. Utilities are high and then there is the question of earthquake insurance. I would think that the bank would like to see reserves of $30,000 - $40,000, as a minimum.

This is honestly what is discouraging us right now. I know for a FACT that the particular city we want to buy in is basically full of cash investors, especially at the Townhouse/Condo level. It's upsetting. It is why we rented for the 7 years we lived there. Buying a house was just not in the cards. We had TWO neighbors in our apartment complex and they were plastic surgeons who were saving up cash like mad so they could purchase a home in a few years. Very discouraging.

We are familiar with the cost of utilities. That's really a non issue. We lived there for over a decade. Honestly, though, it's not much different here, in a bigger house. It all ends up being about the same monthly cost, for us and our uses anyway. In fact, we are paying slightly more over here than we were there, since the house is twice as big. Our water bill here is twice what we were paying over there since we have a yard and sprinkler system. Our A/C is higher in the summer here, and our heating (gas) bill here is also higher since we have an actual winter.

The property taxes will be a bear, though. That is one of the benefits to renting, IMO. You get all the benefits without the big bill twice a year.

We are not he-l bent on buying a home. We are flexible. To be frank, I would happily rent for the rest of my life if it meant we could live there forever. I don't need to own a home ever. Unfortunately, my DH doesn't share my opinion about renting, but he DOES share the "I want to live there forever" sentiment. So, I am trying to find a way to make this happen but am very prepared for the fact that it might not anytime soon. However, DH is reasonable, and if the finances won't allow a home purchase, so be it.

 

[DLgal]

As a home seller, if I had a choice between accepting an offer with a VA loan and one with a conventional package I'd avoid the VA loan without a doubt. I'd even consider taking an offer for a little less money over the VA. In my admittedly limited experience, the inspection is a total PIA. With a normal inspection you negotiate with the buyer on what should be fixed, and in most cases concentrate on anything major that comes up i.e. roof, heat/ac, foundation. With a VA loan there's no negotiating (unless things have changed dramatically) and every.single.little.thing has to be fixed - and fixed to very specific standards. Very tedious.

That said, as has been mentioned, much about home buying varies by region so get to know what the business practices are in YOUR area - that's all that matters. But if the market is as a PP from SoCal mentioned and you're competing against all cash investor offers, don't be surprised if a VA Loan is a bit of a drag from an offer standpoint.

I understand this is the process. As a seller, I understand your position. However, as a BUYER, I don't want to buy a "broken" house. So, if stuff needs to be fixed and you don't want to fix it, I don't want to buy your house. I understand that some buyers are willing to compromise, or offer less money in lieu of doing repairs themselves, but we are not those kind of buyers, so the VA program sounds just fine by me. We can be patient, and wait until we find the right house and everything goes through smoothly. We are not going to be desparate buyers.

I am confident that if we DO end up stationed out there again, we will start off by renting for a year, minimum, so we can take our time on this process. We have friends who bought a home with a VA loan at the end of last year and they actually lived with us for almost a month while the process took place. The amount of stress they were under was unreal, and DH and I agreed that we would NEVER put ourselves in that kind of position. We are happy to rent so we can take our time with the home buying process.

 

[mistysue]

I understand this is the process. As a seller, I understand your position. However, as a BUYER, I don't want to buy a "broken" house. So, if stuff needs to be fixed and you don't want to fix it, I don't want to buy your house. I understand that some buyers are willing to compromise, or offer less money in lieu of doing repairs themselves, but we are not those kind of buyers, so the VA program sounds just fine by me. We can be patient, and wait until we find the right house and everything goes through smoothly. We are not going to be desparate buyers.

I am confident that if we DO end up stationed out there again, we will start off by renting for a year, minimum, so we can take our time on this process. We have friends who bought a home with a VA loan at the end of last year and they actually lived with us for almost a month while the process took place. The amount of stress they were under was unreal, and DH and I agreed that we would NEVER put ourselves in that kind of position. We are happy to rent so we can take our time with the home buying process.

I don't think the PP was saying that people mean to sell you a "broken" house so much as sometimes the standards for what needs to be fixed can go overboard. Like replacing things that are fine but they want newer, think of aging appliances, roof, siding type things that could last 30 years but they may have an age limit that makes it overbearing. My neighbor's house "required" a new roof because the old one was too old- it was 10 years old and wasn't worn at all. Any other buying would have been happy it was that new.
Obviously if things are actually broken that needs to be worked out.

 

[davedmaine]

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.

Roll closing costs into the loan

 

[crisi]

I understand this is the process. As a seller, I understand your position. However, as a BUYER, I don't want to buy a "broken" house. So, if stuff needs to be fixed and you don't want to fix it, I don't want to buy your house. I understand that some buyers are willing to compromise, or offer less money in lieu of doing repairs themselves, but we are not those kind of buyers, so the VA program sounds just fine by me. We can be patient, and wait until we find the right house and everything goes through smoothly. We are not going to be desparate buyers.

I am confident that if we DO end up stationed out there again, we will start off by renting for a year, minimum, so we can take our time on this process. We have friends who bought a home with a VA loan at the end of last year and they actually lived with us for almost a month while the process took place. The amount of stress they were under was unreal, and DH and I agreed that we would NEVER put ourselves in that kind of position. We are happy to rent so we can take our time with the home buying process.

I just sold a house last Fall.

Here is the thing, I had six offers the weekend we listed it. It was a fairly priced house, and we sold it for over its list price.

The offer that we took was a cash, no inspection offer. It meant that it WOULD close and there was zero risk. We took that offer over others that were thousands more because of the lack of bother and quick closing.

You may need patience to find a well kept house, a seller who will wait for a mortgage, at a fair price.

 

[crzyeeyoreangel]

We just brought a house almost 2 month ago. We had to put down 500 with our offer that was called "good faith money" and was later used toward closing. We had to pay 265 for a home inspection and 65 for a pest inspection. Then 210 for the aprarisal. We got a FHA loan whuch meant we had to put 3% down. Plus we had to pay a years worth of home owner insurance upfront per the terms of our loan. Don't forget utilities we had 250 deposit to get the lights and water in our name. We had all the rest of closing costs paid by the owner.

 

[garnetandblack]

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.

I'm late responding but in SC you can use as little as $500 for earnest money and I have used that amount many times (for lower prices properties). $1,000 is typical with median priced homes - for higher expect $2,500 - 5,000.