How Much Money Should I Save to Buy a House in Nashville?
New year, new home? Here’s a breakdown of the costs you should expect to save when purchasing your home in Nashville.
Congrats, you’re thinking about buying a home! Becoming a home owner is a great investment. I like to think of buying a home as a savings account you can live in.
So, first thing’s first— read this helpful guide to prepare yourself for how much money you’ll need, then find a realtor.
There are four main categories to save for when buying a home.
Your down payment
Closing costs
Earnest money
The 1% rule
There will always be something to spend money on, but these take priority. Now, let’s dive in.
Your Down Payment
If you are acquiring a mortgage (getting a loan from a lender), you will need to pay a down payment. A down payment is a percentage of the purchase price that you pay upfront to the seller. The remainder of the payment will come from your mortgage. Remember, the more you put down, the less you pay monthly.
Down payments can vary. Most loans today require a down payment between 3.5% and 5% of the home’s purchase price. Keep in mind, if you put down less than 20%, you will be required to pay private mortgage insurance (PMI) in addition to your monthly mortgage bill—which is comprised of Principle, Interest, Taxes, and Insurance. You pay PMI until the loan-to-value of your home reaches 80%, meaning you’ve paid down 20% of the loan.
If you’re just starting the home-buying process and need help finding a lender in Nashville, or have questions about what you should do, reach out. It is important to do you research and shop around for the right one.
Unsplash / Getty Images / Morning Consult illustration by Czarina Divinagracia
Closing Costs
Closing costs are upfront fees associated with buying a home that you pay at closing. These include: the appraisal, inspections, and home owners insurance. You will also be required to pay fees for loan processing and other costs like processing the title. Generally, the total closing costs you pay will range between 2-3% of your mortgage loan. Your lender can give you a more exact number.
Depending on the market, you can negotiate with the seller to pay certain closing costs on our behalf. We are currently in a seller’s market because there is more demand than there is supply. To make your offer competitive, I recommend limiting your negotiations.
Up-Front Fees
The Appraisal
Lenders may ask for the appraisal fee before closing to secure your appraisal needed for loan approval. Expect to pay from $350-500 (estimated) depending on your lender, appraiser, or home size.
Inspection(s)
All inspections requested by the buyer will need to be paid at the time of service. Estimated home inspection fees range from $250-600 depending on the square footage. Septic system, radon, termite, mold, and structural inspections are add-ons to your initial home inspection.
Home Owners Insurance
Most lenders and insurance companies will ask for one year’s Home Owners insurance paid in full before the closing. Rates will vary depending on the value, location and type of home.
Earnest Money
Earnest money is what you give to the title company as soon as you go under contract. This is your “skin-in-the-game” money and shows the seller you mean business about buying this house. You decide how much Earnest money you give, however at least 1% of the purchase price is polite. This money is refundable if you do not close and stay within the contract terms. When you close, it’s applied to your closing costs or down payment.
The 1% Rule
It’s a good idea to have 1% of the purchase price in savings after closing just in case something comes up. If you are buying an older home already needing repairs, then you should plan for more. Home owners should expect to spend about 1% to 4% of the cost of their home per year on maintenance and repairs.
So, how much?
Here’s a conservative example of what you’ll need to save to buy a $320,000 home in Nashville.
A 5% down payment of $16,000 equals a $304,000 mortgage. So, closing costs will be about $9,120. Plus a $3,200 Earnest money deposit and savings of $3,200 for after closing emergencies.
That means you’ll need to have around $28,320 + $3,200 (savings) in cash to purchase a $320,000 home in Nashville.
Check out this helpful Buyer’s Guide for more info on the Nashville home-buying process. And, reach out if you have more questions about purchasing your new home.
