How Much Money Do You Really Need to Buy a Home in North Carolina?
We know buying a home can feel exciting… and overwhelming all at the same time. Between down payments, credit scores, and monthly payments, it’s easy to feel like everyone else is one step ahead, but don’t worry. We’ve got your back!
The good news? Buying a home may be more attainable than you think.
We sat down with John Pasquinelli from 77 Lending, our preferred lending partner, to answer some of the most common questions we hear from first-time buyers. This is Part 1 of our 3-part series designed to make the process feel a little less stressful and a lot more approachable.
How much down payment do I need?
Probably less than you think.
- USDA and VA loans may allow qualified buyers to purchase with 0% down
- Conventional loans can be as low as 3% down
- FHA loans typically require 3.5% down
Conventional Loans are the most common type of mortgage and are not backed by the government. They often offer flexible options for buyers with strong credit and can require as little as 3% down.
FHA Loans are backed by the Federal Housing Administration and are designed to help buyers who may have lower credit scores or less money saved for a down payment.
VA Loans are available to eligible veterans, active-duty service members, and certain military spouses. These loans often require no down payment and can offer competitive interest rates.
USDA Loans are designed for eligible buyers purchasing homes in certain rural and suburban areas. Qualified buyers may be able to purchase with no down payment.
What credit score do I need?
It depends on the loan type.
- Conventional loans typically start around 620
- FHA loans may allow scores as low as 580
Check your score here.
Can I buy with little or no money down?
Absolutely! Some loan programs, like VA and USDA loans, may allow qualified buyers to purchase a home with no down payment at all. There are also a variety of down payment assistance programs that can help make homeownership more attainable.
For example, some programs provide funds for your down payment that are repaid over time, often through a low-interest loan spread out over 10 years. Others offer forgivable assistance, meaning the funds don't have to be repaid if you meet certain requirements, such as staying in the home for at least three years.
Every buyer's situation is different, which is why it's worth exploring all the options available. You might be surprised by what's possible!
What will my monthly payment look like?
That depends on a few key ingredients: your home's purchase price, loan type, down payment, property taxes, homeowners insurance, and interest rate.
The good news? There may be opportunities to lower your out-of-pocket costs. Seller credits are funds the seller contributes toward your closing costs, helping you bring less cash to the closing table. Lender credits work a little differently. Your lender may cover some closing costs in exchange for a slightly higher interest rate.
Before you start crunching numbers, remember that your monthly payment is more than just the mortgage itself. A conversation with a lender can help paint the full picture and give you a clearer idea of what homeownership will look like month to month.
How much are closing costs? How much are closing costs and what are they?
Closing costs are the fees and expenses associated with finalizing your home purchase. These costs typically include items such as lender fees, appraisal fees, title insurance, attorney fees, prepaid taxes, and homeowners insurance.
Closing costs typically range between 2%–5% of the purchase price, though many buyers working with Garman Homes and 77 Lending often land closer to the 2%–3% range.
Here's a real-world example. If you're purchasing a $350,000 home with a 3% down payment, your costs could look something like this:
- Down payment (3%): $10,500
- Estimated closing costs (2% to 3%): $7,000 to $10,500
- Estimated cash needed at closing: $17,500 to $21,000
Keep in mind that every buyer's situation is different. Your down payment depends on the loan program you qualify for, and your closing costs can vary based on your lender, location, taxes, insurance, and any seller or lender credits that may apply. The best way to know what your numbers will look like is to chat with a lender who can walk you through your options.
Next steps?
We hope you’ll just start the conversation with John and his team (john@77lending.com). You don’t have to have it all figured out before you talk to a lender. Connecting with 77 Lending early can help you have a better understanding of your options, buying power and next steps.
Stay tuned for Part 2 where we’ll break down pre-qualification vs. pre-approval and what you should do before you start shopping for homes.
And remember, you are worthy of good things. You’ve got this!