For a first-time buyer in Sacramento, how much cash do you actually need at closing?

Hi, this is Jason Skelton with Pacific National Lending.

Welcome to another Q&A session where I answer mortgage questions from you all on the internet.

Today's question is:

"For a first-time buyer in Sacramento, how much cash do you actually need at closing?"

Summary:

Jason lays out the full cash picture for a first-time buyer and emphasizes how many creative paths exist. Down payment assistance programs are available, though quality varies and the details warrant careful review. USDA loans permit 100% financing in qualifying rural areas, and veterans have the same 100% option. Conventional financing allows a first-time buyer to purchase with three percent down, meaning a $500,000 home requires $15,000 down. On top of the down payment come closing costs — title, escrow, and appraisal — plus what he calls upfront items: prorated property taxes and a full year of homeowner's insurance paid in advance. Critically, those costs may be paid by the seller through a negotiated credit, making a $500,000 purchase with $15,000 total realistic.

Answer:

For first-time buyers, there are a lot of ways to get really creative with it. There are some down payment assistance programs. Some of them are really good, some are not. So you really want to make sure you look into the ins and outs of what that down payment assistance program entails. Other than that, USDA loans — so if you're buying in an area that's rural, we can do 100% financing. Veterans, same thing, 100% financing. And then like I've mentioned before, you've got conventional loans for a first-time homebuyer with only 3% down. So you can buy a $500,000 home with $15,000 down. The only other thing that comes in on top of your down payment would be closing costs. There are title and escrow fees and an appraisal. Other than that, the main other cost would be what we call upfront items, which is paying prorated property taxes, paying your homeowner's insurance a full year in advance, things like that. So those different costs can come into play, but those are allowed to be paid for by the seller. So you can negotiate a seller credit to help you offset those costs. So it is realistic and reasonable that you could purchase a five hundred thousand dollar home with a conventional loan and only need to come in with fifteen thousand dollars total.