How much should I expect to pay for a house?
Purchasing a home is one of the biggest purchases most individuals will make in their life. According to estimates from Freddie Mac, 64% of Americans will find themselves a homeowner at any given point in time. Typically, most lenders will suggest less than 28% of your monthly income should be spent on a mortgage.
Different loan programs will have different minimum requirements for a down payment. When you put down 20% or more, you won’t have to pay mortgage insurance, which increases your monthly mortgage payments. While the “20 percent” threshold is thought of as the typical down payment for a mortgage, there a number of options available on the market.
On the low-end, prospective homeowners can expect to pay 3.5% of the home’s price as a down payment. In addition to the down payment, you will also have to factor in closing costs which typically fall in a range between 2 and 5%. For example, a $100,000 house would come out with a down payment of approximately $3,500 (3.5% x $100,000) and closing costs between $2,000 and $5,000 (2%/5% x $100,000).
Remember, the more money you put down upfront and the less you borrow, the less the interest you’ll ultimately pay on your loan.