Saving for your Scottsdale Home’s Down Payment

Scottsdale realtor wants to share tips on saving money for purchasing your dream home

Saving money for a down payment is a good time for getting your overall finances in order before beginning your search for a Scottsdale home.

Rounding up financial records, closely examining your spending habits and setting a budget are just a few of the things you need to do. Remember, you also need money for other up-front expenses like closing costs and connecting utilities.

How much should I have to put down on my new Scottsdale home?

Down payments are usually expressed as a percentage of the overall purchase price. It varies depending on the lender, the type of financing and the amount of money being lent. Typically, a down payment is 20% of the purchase price but there are special financing programs (i.e. government sponsored programs through the Veterans Administration (VA) or Federal Housing Administration (FHA)) available that only require a minimal down payment like 3% of the purchase price.

If your down payment is less than 20% of the purchase price, many lenders will require you carry private mortgage insurance, or PMI. This insurance usually involves an up-front payment at closing along with a monthly premium. It protects the lender in case of loan default but once you’ve paid off 20% of the loan, you can request the coverage be cancelled. Some lenders cancel it automatically while others require you make a request in writing.

If you’re having trouble saving money for your Scottsdale home, many lenders allow you to use funds from a gift for the down payment. Gift funds can come from family, friends or other sources…but remember, many lenders usually require a letter stating the money does not have to be repaid. Some lenders may also require you pay at least a portion of the down payment with your own money. Ask your lender about their policies regarding gifts.

What other up-front costs will I need to be prepared for?

Other up-front costs associated with purchasing a Scottsdale home that you will need to be prepared for include:

1. Earnest money
   When you make an offer, you will most likely need to have money available for a deposit to give to the seller. If your offer is accepted, the amount will be credited toward your down payment. Amounts vary widely on the seller and the local market so be prepared.
   
   
2. Closing costs
   In addition to the down payment, you will need to have funds for additional fees associated with the loan for your Scottsdale home. Closing costs cover items like title insurance, county documentary stamps, loan origination fees, the survey, attorney’s fees, etc. Lenders are required to supply you with a good faith estimate of what these costs are going to be.
   
   Some buyers are surprised by the amount of the closing costs, which can easily run into the thousands of dollars. Closing costs can be negotiated with the seller in some circumstances though.

These are just a few ways you can save the up-front costs of purchasing a Scottsdale home. The more you have, the better lenders will look at your application. Feel free to contact a premier Scottsdale realtor for any other tips on saving the money you need to purchase your next dream home.

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