Skyrocketing housing prices have somewhat stalled, and those looking to buy their first home in a competitive market have taken this as a green light. You’ve saved up to pull the trigger-- how do you know your efforts have paid off?

Between a down payment and closing costs, homebuying in this competitive market can seem daunting. Fortunately, it doesn’t have to be.

There are practical strategies for saving, as well as shockingly manageable down payment plans available. You have more options available to you than you realize!

Contrary to popular belief, your ideal home may be well within reach. All it takes is a solid game plan. Let’s examine the time frame involved in saving for a home, and break down what the costs might actually look like for you.

How Much Time Do You Need To Save for a Down Payment?

One of the biggest hurdles homebuyers face is saving for a down payment. As you’re budgeting and planning for your home purchase, you’ll want to understand how much you’ll need to put down and how long it will take you to get there. The process may actually move faster than you think.

Using data from the U.S. Department of Housing and Urban Development (HUD) and Apartment List, we can estimate how long it might take someone earning the median income and paying the median rent to save up for a down payment on a median-priced home. Since saving for a down payment can be a great time to practice budgeting for housing costs, this estimate also uses the concept that a household should not pay more than 28% of their total income on monthly housing expenses.

According to the data, the national average for the time it would take to save for a 10% down payment is right around two and a half years. 

What if you only need to save 3%?

If you’re able to take advantage of one of the 3% down payment programs available, your goal of owning a home just got a lot more attainable. It’s a common misconception that you need a 20% down payment to buy a home, but there are actually more affordable options and down payment assistance programs available, especially for first-time buyers. The reality is, saving for a 3% down payment may not take several years.

Wherever you are in the process of saving for a down payment, you may be closer to your dream home than you think. Interested in exploring the down payment options available in our area and how they support your plans? Let’s chat!

Budgeting for Closing Costs

When buying a home, it’s important to have a budget and make sure you plan ahead for certain homebuying expenses. Saving for a down payment is the main cost that comes to mind for many, but budgeting for the closing costs required to get a mortgage is just as important.

What Are Closing Costs?

According to Trulia:

“When you close on a home, a number of fees are due. They typically range from 2% to 5% of the total cost of the home, and can include title insurance, origination fees, underwriting fees, document preparation fees, and more.”

For example, for someone buying a $300,000 home, they could potentially have between $6,000 and $15,000 in closing fees. If you’re in the market for a home above this price range, your closing costs could be greater. As mentioned above, closing costs are typically between 2% and 5% of your purchase price.

‍Trulia gives more great advice, explaining:

“There will be lots of paperwork in front of you on closing day, and not enough time to read them all. Work closely with your real estate agent, lender, and attorney, if you have one, to get all the documents you need ahead of time.

The most important thing to read is the closing disclosure, which shows your loan terms, final closing costs, and any outstanding fees. You’ll get this form about three days before closing. This is because once you (the borrower) sign it, there’s a three-day waiting period before you can sign the mortgage loan documents. If you have any questions about the numbers or what any of the mortgage terms mean, this is the time to ask—your real estate agent is a great resource for getting you all the answers you need.”

As home prices stabilize, it’s more important than ever to make sure your plan includes budgeting for closing costs. Let’s connect to be sure you have everything you need to land your dream home!