Understanding How Much You Will Need to Get Into Your Next Home

A majority of real estate agents will often tell you that having a better idea of how much cash you will need to get into your next home is essential.

And while it’s not directly linked to setting your selling price, it’s a number that can sometimes be all over the place, depending mainly on whether you plan to buy or rent your next place.

If you’re planning to buy, here are some costs you can count on.

The Down Payment

First, of course, you’ll need a down payment. Traditionally, 20 percent is the gold standard for down payments. If you have at least that much in equity from your current home, you’ll discover more lenders to select from, lower interest rates and you won’t pay any form of private mortgage insurance (PMI).

If you are not getting enough from your sale proceeds to hit that 20 percent, there are lower down payment loans that may make more sense. Best part about it if you are a U.S. veteran, you can even get a zero-down VA loan without any PMI.

A decent amount of repeat home buyers do not realize they may still qualify for an FHA loan. With an FHA loan, you can get in with as little as 3.5 percent down. Unfortunately, the downside is that you’ll be paying the PMI for the life of the loan if you put down less than 10 percent.

Even if you do not qualify for an FHA loan, you can get a conventional mortgage with as little as 5 percent down but you’ll have to pay PMI. In addition, there are some low-down payment programs you may qualify for, based on your income.

Our realtors recommend you be cautious, however, a majority of these programs are focused on first-time home buyers.

Closing Costs

As a seller, you’ll pay both your local real estate agent and the buyer’s agent a commission. Furthermore, you will also pay real estate sales taxes and title transfer fees.

But buyers don’t get away from the pain of closing costs either. As a matter of fact, you may have been asked to help your buyer pay for some of theirs. Overall, buyer’s closing costs are less than the seller’s, but still go anywhere from 3 to 5 percent of the sales price.

Unless you can negotiate closing costs as part of your purchase contract, our realtors suggest you add that to your down payment when calculating what you’ll need.

Understanding Moving Costs

These can depend widely on how far the move is, how many things you actually have, and how willing you are to enlist friends and family to assist you.

If you’re just moving across town and have friends with pickup trucks, most real estate agents will tell you that it could just set you back some gas money and the cost of some pizzas and beer. But once choose how you’ll move and learn what it actually costs, add that to your final number.

Deposits and Odds & Ends

Our real estate agents say that even with an outstanding credit record, you may be required to pay a security deposit with your new utility company. When moving, it may seem like a small amount.

But if you’re making a stretch move, even the smallest amounts can be unwelcome surprises. Our real estate agents suggest you give yourself a little bit of space for these extra expenses, and for some of the unknowns you’ll likely face.

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