What First Time Buyers Need to Know About Down Payments and Closing Costs
The most common misconception about buying a home is that you need twenty percent down to qualify for a mortgage. This belief keeps many people renting longer than they need to. In reality, there are many financing options that make homeownership more attainable than ever before.
Breaking Down the Numbers
When buying your first home, two major expenses come into play: the down payment and closing costs.
Down Payment: Depending on your loan type, you may only need between three and five percent down. For a $600,000 home, that could mean as little as $18,000. FHA, VA, and USDA loans also provide flexible options, particularly for first time buyers or those with modest credit scores.
Closing Costs: These generally range from two to three percent of the purchase price and cover lender fees, title insurance, property taxes, and escrow services. They are due at closing, but there are creative ways to reduce or offset them through seller credits or assistance programs.
Earnest Money Deposit: This is your good faith deposit to show the seller you are serious about purchasing the property. It typically becomes part of your down payment at closing.
Down Payment Assistance and Grants
Across the country, there are hundreds of programs designed to help first time buyers. Many states and cities offer grants or low-interest loans that can be used for your down payment or closing costs. Some lenders even provide their own incentive programs to make homeownership more accessible.
If you are buying in Los Angeles or surrounding areas, local programs often support buyers with moderate incomes, especially those purchasing primary residences. Speaking with a local lender or agent who understands these opportunities can save you thousands of dollars.
How to Prepare Financially
Start by reviewing your credit score, as it directly affects your interest rate. Create a savings plan that prioritizes your down payment and a small cushion for post-move expenses such as furniture or maintenance. Avoid large new debts or major purchases before applying for a mortgage, as those can change your approval status.It all begins with an idea. Maybe you want to launch a business. Maybe you want to turn a hobby into something more. Or maybe you have a creative project to share with the world. Whatever it is, the way you tell your story online can make all the difference.
Do not let outdated assumptions hold you back. Schedule a consultation with a trusted agent and lender to explore what you can afford today. With the right strategy, homeownership may be closer and more affordable than you ever imagined.
