How much does it really cost to buy a house in 2023? The median home price nationwide was $185,600 in 2016, but depending on where you live, the cost of buying a house may be higher or lower than that number. Plus, these numbers don’t factor in ongoing costs like property taxes and maintenance—let alone the down payment itself!
Do your research
The exact amount you will need to purchase a home depends on where you live, how big the home is and what additional costs are involved. Generally, new homeowners should expect to spend between 3% and 5% of their budget on upfront costs such as down payment and closing costs. Ongoing costs can vary depending on what type of mortgage loan or lease agreement is being taken out. First-time homebuyers may also be eligible for special perks like help with closing costs or moving expenses.
Consider your budget
Home-buying eligibility can vary depending on your credit score, down payment, and income. If you're looking for an affordable place to live, here's how much you'll need:
The average down payment for first-time homebuyers is $12,000.
You'll be able to afford about $250 per month for the mortgage and property taxes.
Expect at least $400 per month in utilities if it's a one-bedroom apartment.
The average down payment for first-time homebuyers is $12,000.
You'll be able to afford about $250 per month for the mortgage and property taxes.
Expect at least $400 per month in utilities if it's a one-bedroom apartment.
Get pre-approved for a mortgage
The mortgage preapproval process is not only the most important step, it's also the first. Preapproval is the process of determining how much of a mortgage you qualify for and what your monthly payment would be. The pre-approval process can take anywhere from one to three days and will give you an idea about what size of mortgage you can afford. This is key because it will allow you to know how much home-buying eligibility you have.
Save for a down payment
It's generally accepted that the average down payment for a home is about 20% of the purchase price. This means that if you're buying a $300,000 home, you'll need about $60,000 for your down payment. Down payments come from two sources: savings and gifts from family members. In order to save up for your first down payment, it's best to start with one of these two sources by saving as much as possible while paying off debt and contributing as much as possible towards retirement.
Know your credit score
A good credit score is important for buying a home, but it's not the only factor. You'll also have to know your upfront costs and how home prices have changed since the last time you bought. Home buyers will have an easier time securing a loan if their credit score is 700 or higher. It's possible that up-front costs can be lowered by taking out an interest-only mortgage or getting creative with down payment funds. With some planning and financial discipline, most people can afford to purchase their dream home!
Understand the different types of loans
Before you get too far into the process, it's important to understand what types of loans are available. While there are many different types of loans, the two most common loan programs are fixed and adjustable rate mortgages (ARM). Fixed-rate mortgages have an interest rate that remains constant over the life of the loan. The cost of an ARM is typically lower than a fixed-rate mortgage because the interest rates can change periodically based on current market conditions.
Find the right real estate agent
Finding the right real estate agent can be difficult. But, we've created this Home Buying Costs FAQ and How To Lower Your Costs to help make it easier for you. We've also included some resources for finding a realtor so that you can find one that is right for you. Here are a few questions to ask before signing anything:
- What are the fees associated with buying or selling a property?
- Are there any charges when I use your services as my real estate agent?
- Will I have access to all of your listings without paying additional fees?
- Do you provide buyer representation only or do you offer seller representation too?
Consider your long-term plans
Regardless of where you are in your life, buying a home is probably one of the most important financial decisions you'll make. It's worth figuring out how much money you'll need and how to lower your costs as early as possible so that when the time comes, it won't be an added stressor. There are three major home-buying costs: down payment, closing costs, and monthly housing expenses (including mortgage payments).
The average American has about $7000 saved for a down payment.
As for monthly housing expenses (excluding mortgage payments), which include things like homeowners' insurance, property taxes, HOA fees etc., this number can vary greatly depending on where you live; some areas have higher property taxes than others or higher HOA fees due to increased amenities offered.