Knowing what to budget for and how to save while buying a home can be intimidating at first. But it doesn't have to be that way. Understanding some of the charges you may face is one way to remove the fear of budgeting. And to do so, resort to reputable real estate agents. They can assist you with budgeting and planning your finances.

Here are just a few costs experts say you can expect.

1. Down Payment

Saving for a down payment is most certainly at the top of your priority list as you prepare to buy a home. But do you know how much money you'll need to set aside? While every scenario is different, it's a frequent fallacy that putting down 20% is essential. A Mortgage Reports article explains why this isn't usually the case:

“The idea that you have to put 20% down on a house is a myth. . . . The right amount depends on your current savings and your home buying goals.”

To further understand your options, work with a trusted real estate expert to go over the various loan types, down payment assistance programs, and the requirements for each.

2. Closing Costs

Make sure you also budget for closing costs, which are a collection of fees and payments made to the various people involved in your transaction. Bankrate explains:

“Closing costs are the fees you pay when finalizing a real estate transaction, whether you’re refinancing a mortgage or buying a new home. These costs can amount to 2 to 5 percent of the mortgage so it’s important to be financially prepared for this expense.”

The best way to understand what you’ll need at the closing table is to work with a trusted lender. They can provide you with answers to the questions you might have.

3. Earnest Money Deposit

If you want to be completely prepared, consider saving for an earnest money deposit (EMD). When you make an offer on a house, you must pay an EMD as a sign of good faith. It's normally between 1% and 2% of the entire home price, according to realtor.com.

This deposit works like a credit. It is not an additional fee; rather, it is paying a portion of your costs in advance. You're utilizing some of the money you've already saved for your purchase to demonstrate to the seller that you're serious about their home. Realtor.com explains how it works as part of your transaction:

“It tells the real estate seller you’re in earnest as a buyer, . . . . Assuming that all goes well and the buyer’s good-faith offer is accepted by the seller, the earnest money funds go toward the down payment and closing costs. In effect, earnest money is just paying more of the down payment and closing costs upfront.”

Remember that an EMD is not necessary, and it does not guarantee that your offer will be accepted. Working with a real estate advisor will help you understand what is ideal for your scenario and any special regulations in your location. They will assist you in determining what steps you should take in the homebuying process to maximize your chances of success.

Bottom Line

Budgeting for your home purchase doesn’t have to be scary. Let’s connect so you’ll have an expert on your side to answer any questions you have along the way.