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You're almost there! You’ve set a budget for your monthly mortgage payment and saved up a down payment—but there’s one more thing you need to consider: the closing costs for your home.
*UPDATE: The PowerSaver Grant from HUD and FHA was discontinued in May 2015. But you can now take advantage of the AmeriFirst PowerSaver grant. What exactly is the PowerSaver Grant? How does it help home buyers and homeowners? Let's take a look. Many home buyers and current homeowners see “going green” as a great idea. Making your home more energy efficient is a terrific way to save money in the long run. However, it tends to cost money up front. Plus, how do you know you’re actually making a meaningful difference to your budget and the environment?
How much can I expect to pay in closing costs? That's a common question, and a good one, especially from first-time homebuyers. Closing costs are fees that you pay to get a mortgage. These can include appraisal, title services, credit report, attorney and underwriting fees. Closing costs typically run between two and five percent of your purchase price.
Down payments are required on almost every mortgage loan out there right now. Only a couple programs do not require the buyer to have a little “skin in the game.” For first time home buyers having a large cash reserve can prove to be a problem. Let’s look at a $70,000 house with a 5% down payment. This means you will borrow $66,500 from the lender, add $3,500 of your own money, and give the $70,000 to the seller. Because a down payment does not include closing costs or cash-to-close, you will also need to have other money at the time of closing. This could mean that you need around $9,000 total for the 5% down payment and the money for closing.