First-Time Homebuyer Math: $226,000 Purchase, ~$500 Cash to Close
First-Time Homebuyer Math: $226,000 Purchase, ~$500 Cash to Close
Today, I sat down and did the math for a first-time homebuyer.
Purchase price: $226,000.
Estimated cash to close: $500.
Yes—just FIVE HUNDRED DOLLARS.
How is that possible?
The buyer qualifies for:
• 0% down
• Up to $15,000 in forgivable assistance toward eligible closing costs and downpayment, but limited to 6% of the purchase price
• No monthly PMI
The interest rate is 7.375%.
That number may sound high at first.
But the interest rate alone does not tell the full story.
Because there is no monthly PMI, the total payment is comparable to a traditional mortgage at approximately 6.875% with PMI.
The seller has also agreed to provide a $7,000 concession.
Since the assistance covers most of the buyer’s upfront costs, we may have more flexibility to negotiate a lower purchase price.
For this two-bedroom, two-bathroom townhome, the estimated monthly principal and interest payment is approximately $1,538.
After adding property taxes and homeowners insurance, the total monthly housing payment is around $2,000.
That is close to what many people are already paying in rent.
But there is one major difference.
Your rent helps your landlord build equity.
Your mortgage payment gives you the opportunity to build equity for yourself.
The headline rate never tells the whole story.
Before giving up on the idea of homeownership, let’s sit down and do the math together.
You may be much closer than you think.
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