How much does it cost to buy a house

How Much Does it Cost to Buy a House?

How much does it cost to buy a house? It could be less than you think! You could spend $0 buying a house or more than $20,000. How much it costs to buy a house is going to depend on your personal location and situation 

What is the median home price in the United States? 

The median home price to purchase a home in the United States is $374,900 as of 2021. This is an increase of 16.2% from 2020.  However, this is just an average and you can easily find homes less expensive in all but the most expensive housing markets. ( Looking at you California) .

The Median Home Price along the Gulf Coast

How much it costs to buy a house is largely going to depend on your location. Here’s how the Gulf Coast States breakdown for typical home value: 

STATEAverage House Cost
Alabama$170,184
Florida$297,390
Louisiana$187,844
Mississippi$140,818
Texas$247,210

If you live in higher-priced markets in Florida and Texas you will need to save more money than if you live in a lower-priced market like Mississippi or Louisiana. 

You should also know that moving into the suburbs of larger cities is going to cost more than it would to buy a home in more rural areas. 

The average home price in Baton Rouge, LA is $219,000 but the average price in McComb, MS (which is only 80 miles away) is $101,274. 

If you purchase a home for $219,000 with a 3% down payment and closing costs of 3% you’d need $13140 to buy the house. 

How Much Money Do You Need to Buy a House? 

In order to determine how much money you are going to need to purchase a house, you need to look at two different costs. 

  • Upfront Costs
  • Monthly Costs

Upfront Costs

When buying a house the most difficult savings come from the upfront costs. The upfront costs of buying a home are things like your down payment and closing costs. 

These costs have to be paid in full at the closing in order for your loan to be approved. However, there are many different ways to get all or part of these costs covered.  We’ll talk more about this later. 

Down Payment 

Your down payment is a percentage of the total loan amount you are borrowing. Your down payment is the initial upfront payment you make to the lender to provide “skin” in the game.  

The average first-time homebuyer puts down about 7% to purchase their home, but this is not a requirement.  In fact, there are a few different options to buy a home with a $0 down payment. 

Related: First-Time Homebuyer Guide

$0 Down Payment Home Options: 

  • USDA Rural Development Loan 
  • VA Loan 
  • Down Payment Assistance 
  • Gift Funds

All of our loan programs offer either $0 or low down payment options: 

Conventional MortgageFHA MortgageVA Mortgage USDA Mortgage
Down Payment 3% or $65703.5% or $76650% or $00% or $0
Closing Costs$2500$2500$2500$2500
Prepaid Costs$4380$4380$4380$4380
Total Cost$13450$14545$6880$6880
Cost to Buy a Home for $219,000

Closing Costs

In addition to down payment funds, you will also need to consider your closing costs.  Closing costs are third-party fees that you pay different providers for closing on your home.  

Read: How Much are Closing Costs?

Common Closing Costs Include: 

  • Title Fees
  • Appraisal Costs 
  • Government Fees
  • Recording Fees
  • Lenders & Owner Title Insurance 
  • Credit Report 
  • Verification of Employment 
  • Underwriting & Processing Fees
  • Mortgage Points

You should expect your closing costs to be between 1% and 2% of your total purchase price.  It’s always better to overestimate and have extra in your budget than to underestimate. 

Prepaid Costs

Your prepaid costs are also part of the upfront costs you have to pay at your loan closing. However, they are different than closing costs because they are paying for a service but rather they are upfront payments for ongoing expenses. 

Some common prepaid costs include: 

  • Homeowners insurance 
  • Flood insurance 
  • Property Taxes
  • Prepaid Interest

Each of these costs will be paid upfront but are also ongoing as well. 

Homeowner’s Insurance 

Your homeowner’s insurance has an annual premium that is based on your credit, location, condition, size, and age of the home you are buying. 

We typically estimate between 1%-2% of the purchase price as your annual premium. 

Flood Insurance

Your homeowner’s insurance does not cover your home in the event that rising water damages your home. For flood events, you’ll need flood insurance in order to protect your home. 

The cost of flood insurance can vary wildly from $400 a year for homes in Flood Zone X  to over $5,000 per year for homes located in Flood Zone AE. 

If you are on a tight budget we’d encourage you to look for homes located in Flood Zone X. 

Also just a quick note on flood zones. There is no such thing as a home that’s not in a flood zone.  Flood zone x just means the home is located in an area that’s least likely to flood. 

Property Taxes

If you’ve been alive for at least 10 years, you likely understand that you have to pay taxes on EVERYTHING.  Owning a house is no different.  

Each year your parish or county assesses the value of your home and gives you a bill based on that value.  Your property taxes are used to pay for schools, the sheriff’s department, and other local issues. 

Each parish or county will likely have a website you can visit that will tell you the tax rate for your home.  

We typically estimate between .5% and 1% of the purchase price depending on the location and price of the home. 

Prepaid Interest

When you buy a house, your first mortgage payment won’t be due for 30 to 60 days depending on what day you close.  When you close on your home, you need to pay the interest that will accrue from the day you close on the home until the date of your first payment. This is known as prepaid interest. 

Earnest Money 

When you get an offer accepted on your house, you may be required to provide a deposit to secure the contract. This upfront deposit to the seller is known as earnest money. 

Earnest money shows the seller that you are a serious buyer, and it also provides the seller security if you back out of the contract. 

Your earnest money deposit won’t go directly to the seller but will be placed in an escrow account usually held by the title company.  Your deposit can be credited back to you at closing. 

If you fail to close on the home, your earnest money deposit could be provided to the seller so it’s important to read your contract and know exactly what options you have. 

Cost of Moving 

When you buy a house you’ll also need to think about how much it will cost to move. Do you plan to move on your own, rent a Uhaul or hire a moving company? 

If you are just moving to a new neighborhood in the same town your costs should be relatively low, but if you are relocating to a new city or state these can be more expensive. 

Whether you are doing a DIY Move or Hiring a professional, there are expenses you should consider:

  • Boxes
  • Tape
  • Markers
  • Plastic Wrap
  • Packing Paper 
  • Bubble Wrapper 
  • Labels 
  • Furniture Pads
  • Equipment Rental 
  • Dolly 
  • Gas 
  • Mileage Expenses 

Whether you are doing a DIY Move or Hiring a professional, there are expenses you should consider

How much does it cost to buy a home? You also need to consider your monthly costs as well. 

Monthly Costs

Your monthly costs are going to be the things you have to pay for each month moving forward. In order to not make owning a home a burden, you should make sure that your monthly costs will fit into your budget. 

Mortgage Payment

Your biggest monthly expense when it comes to buying a home is your monthly mortgage payment.  This is why the most important step in buying a house is to set and know your budget. 

30 years is a very long time to make a mortgage payment that you can’t really afford. By doing a little work up front and sticking with it, you will prevent a lot of headaches down the line. 

Your mortgage payment contains more than just the money you have to pay the bank each month. 

Mortgage lenders use the acronym PITI to show you how your mortgage payment is broken down: 

  • P: Principal 
  • I: Interest 
  • T: Taxes
  • I: Insurance 

Understanding Your Mortgage Payment

Your mortgage payment includes your loan repayment known as principal and interest, your annual property taxes, and your annual insurance premium. 

If you put less than 20% down it will also include PMI or private mortgage insurance as well. 

HOA Fees 

If you move into a neighborhood that has a homeowners association,  you’ll also have HOA fees as well. 

The purpose of an HOA is to maintain the shared spaces within your neighborhood and create rules that limit the changes someone can make that could lower the property values. 

HOA fees are money you will pay monthly, quarterly, or annually to help maintain all properties, amenities, and common areas. 

Ongoing Maintenance Costs

Another part of owning a home that you need to consider is the mainteance costs associated with owning a home.  If you were renting these could be costs you weren’t previously responsible for. 

Here are some common maintenance costs associated with owning a home: 

  • Lawn care and Maintenance 
  • Plumbing 
  • A/C & Heat Repairs
  • Air Filters
  • Gutter Cleaning 
  • Smoke & Carbon Monoxide Alarms 
  • Electrical Issues
  • Hot Water Heater 

A good idea is to plan on budgeting at least 1.5% of the home’s value each year for maintenance costs. If you live in an older home it would be wise to double that. 

How to Save to Buy a Home 

The most important thing you can do to save money to buy a home is to start actually saving money. The best way to do this is to know exactly how much you are spending each month. 

You can sign up for a service like mint.com or print your bank statements for the last few months and start categorizing your expenses. 

Determine what areas you can do without and allocate that money to saving for a house. 

Paying off High-interest debt is another great way to free up income each month in order to buy a house. 

Once you know how much you can save each month, divide that amount by the amount you’d need to buy a home. 

$8000 (upfront home cost) \ $500 a month (Amount you can save) = 16 months. 

If you find that it will take you more than a year or two to save for a down payment, then you may need to eliminate some debt, or you are in a lower income bracket. 

It would be wise to look into no down payment programs if you are in a lower income bracket. Many of these programs were designed specifically for low to moderate-income families. 

Buying your first home doesn’t have to be impossible or expensive. With a little planning and the right mortgage experts in your corner, you could own your own home. 

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