How Much Cash Do We Need To Buy A House?

I have conversations every day that remind me to go back to basics when you’re talking about real estate transactions. With that in mind, I’d like to go over the basics of a mortgage and how much you actually need to buy a house in the DC area. Now, I am NOT a loan officer, so to find out what you really qualify for based on your income, assets, debts, credit score, and other factors, please call a lender. The estimates I use below are from Brian Picker at 1st Mariner Mortgage.

FHA: Requires a minimum down-payment of 3.5% of the purchase price

Ex. Your monthly rent is $2,100 for a 1-bedroom in Arlington
Annual Income of $110,000

You could BUY a 1-bedroom Condo for $400,000 sales price
Down-payment of $14,000
Closing Costs: $12,000 (could be partially or fully paid for by the seller)
Monthly Mortgage Payment: $2,596.17 (doesn’t include condo fee)

But here’s the real reason people buy real estate:

Renting, you get no write offs. Your annual taxes on an income of $110k are $36,300
Buying, you get to write off taxes and interest. Your annual taxes would be $30,292.75

You’d save $6,007.25/year in taxes or $500.60/mo.

If you’re a Veteran or qualify for a VA Loan, you have the option of 100% financing, meaning you don’t need ANY money to buy.

If you have enough cash to buy using a Conventional Loan, which most people think of as requiring 20% down and the only way to buy a property, you actually DO have other options:

In SOME cases, you can put down as little as 5%. You could put down 10%, but in both of these cases you’ll still have monthly mortgage insurance. If you do put down 20%, you won’t have monthly mortgage insurance (otherwise known as PMI).

So you do have several options if you’re thinking about buying. Ask ANY question you want, whether it’s directed to me or to Brian – no question is too simple, and no question will go unanswered. But you have to ASK in order to find out!