29 Dec Your guide to down payments and earnest money in Glendale, AZ
Thinking about buying a home in Glendale? You’re probably figuring out your finances, and two big terms might be swirling around your head: down payments and earnest money. Let’s break these down in simple terms so you can navigate your home-buying journey with confidence.
Understanding Down Payments: How Much Do You Really Need?
The old school thought was to save 20% of the home’s purchase price for a down payment. For a $300,000 house, that’s a whopping $60,000! But hold on—things have changed. Nowadays, you don’t necessarily need that much to get into a new home. There are loads of loan options out there that require much less up front. For instance, with an FHA loan, you might only need 3.5% down. And if you’re a veteran, you might qualify for a VA loan that doesn’t require any down payment at all.
What About PMI?
If you go with a smaller down payment, you might have to pay for private mortgage insurance, or PMI. This is something lenders require to protect themselves just in case a borrower can’t pay back the loan. The good news? You can usually cancel it once you’ve built up enough equity in your home.
Earnest Money: Show You Mean Business
Earnest money is like a deposit. When you make an offer on a house, putting down some earnest money shows the seller you’re serious about buying. It’s not the same as a down payment but think of it as a good faith gesture that goes towards your total purchasing costs. Usually, it’s about 1% of the home’s price and is held in an escrow account during the closing process.
Why It Matters
This earnest money can help strengthen your offer, especially in a competitive market. But be careful—if the deal falls through and it’s not covered by your contingencies, you might not get that money back.
When you’re budgeting for a home, remember that the down payment isn’t the only expense. Closing costs, moving expenses, and immediate home repairs can add up. By understanding the full financial picture, you can plan better and avoid surprises.
While 20% down is ideal, there are many ways to buy a home without that much up front. And with the right strategy, earnest money can be a powerful tool in your home buying arsenal.
Thinking of buying a home in the Northwest Valley of Arizona? I’m here to help guide you through the process and answer any questions you might have. Reach out anytime—I’d love to help you find your dream home!