So, you’ve got to be ready for these expenses by building up rainy day money. When you own a home, there’s no landlord to call when you need to replace the water heater or you need a new HVAC system. The costs of buying a house go beyond just taking out a mortgage. In addition to saving for a down payment, you also want to build up an emergency fund when you’re getting ready to buy a house. The money you’re building up for a down payment is best saved in a safe parking space like an online savings account or a CD. Here are some other examples: Purchase Price of Homeġ2-Month Timeline to Build Up 20% Down Payment Divided by 24, you’d have to save about $1,666/month if you want to avoid PMI. If you have 24 months until you’re likely to make a home purchase, try to estimate what 20% down would look like and divide that by 24.įor example, if you plan to buy a $200,000 home, 20% down would be $40,000. You’ll pay private mortgage insurance (PMI) - which protects the lender just like MIP does - but the PMI can be dumped when your loan-to-value ratio reaches 80%.Įither way, it’s best to avoid MIP or PMI by coming up with a 20% down payment!īegin by looking at your home-buying timeline to help you do the math. MIP protects the FHA in case you default.Ĭontrast that with putting less than 20% down on a conventional loan. The downside to putting that little down is that you’re typically locked into a mortgage insurance premium (MIP) for the life of the loan. But if you can’t come up with that amount, there are other options.įor example, the Federal Housing Administration (FHA) loan program requires only a 3.5% down payment of the purchase price. Ideally, you should aim to have a down payment equal to 20% of the purchase price of the kind of home you want to buy. Save for a Down Payment and Build an Emergency Fund Within this first step, there are four main topics we’ve got to tackle: But before you can start the process, you’ve got some homework to do. Table of Contentsīecoming a homeowner is likely the biggest financial move you will ever make in your lifetime. In this article, we’ll take a look at the process of buying a house step-by-step.
Let’s face it: Buying a house can be complicated whether you’re an experienced or first-time homebuyer, and there are many mistakes that you’ll want to avoid.
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And one of the greatest benefits of owning a home is that you can create wealth for yourself.īut are you scratching your head wondering exactly how to buy a house? After years of giving advice to home buyers, money expert Clark Howard and Team Clark have come up with an easy-to-understand process.
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