How much money do I need to buy a Metro Detroit home

In order to buy a metro Detroit home you need to cover three major items.

1. the down payment
2. the mortgage companies closing costs
3. the tax pro rations and escrow account setup

I had one client ask me how much they needed. He wanted to buy a $40,000 Redford foreclosure or Livonia foreclosure. This is what I emailed him.

You will need a certain amount of money to close the loan and your new home purchase. You currently have $1500.

Your costs will be:

3.5% downpayment
Quicken's approx closing costs $2200
Taxes $3000 most of the homes that you are looking at whether they are $30,000 or $60,000 will have taxes of approx that much. You will need a full year of taxes to cover escrow set up and tax pro-rations to pay the seller back for the property taxes he has already paid. So look at the taxes on the listing sheet of each home and you will need that much for closing.

You have told me you are getting the down payment assistance. But the issue is that you need $5200 more for closing costs, escrows and tax pro-rations. You have $1500 that leaves a $3700 balance. We can make some of that up with sellers concessions.

But the issues is that you want to buy a $30,000 - $40,000 house. 6% of a $40,000 house is only $2400. So you will be short $1300. The only way you can bridge the shortage is save more money or buy a more expensive house. You need to buy a $60,000 house to be even close.

The other option you wanted to do is not allowed by any bank. You can't borrow the money from your VISA for your down payment. They will then include that in your debt ratio and the money would have to be in your bank checking or savings account for over two months for it to be used.

So basically you need to save more money to buy a house at this point or buy a more expensive house so you can get the closings costs, the tax pro-rations, and the escrows paid for. But only go up in price if you can afford the payment. Other wise you should put off buying a home until you save up more money for all the costs involved. Let me know what you decide to do.

Russ Ravary your Metro Detroit real estate agent buying and selling Livonia real estate, Wayne, Oakland, and Livingston County homes

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