How Much Money Should I Have Saved to Buy My First Home in Orange County?

How much money should you have saved to buy your first home in Orange County? Enough for your down payment and closing costs, plus the smaller costs before and after closing that many first-time buyers don't plan for.

I'm Jeanette Nelson, a REALTOR® with Jeanette Nelson Real Estate, Keller Williams Realty, serving Orange County, Huntington Beach, Costa Mesa, Fountain Valley, and surrounding areas. Before first-time buyers tour homes, I map out every dollar they'll need with them.

The full list: down payment, earnest money, closing costs, inspections, reserves and a cushion, and moving costs.

Less than many people think, yet more than zero for most loans. The Consumer Financial Protection Bureau (CFPB) says that in most cases you need a down payment of at least 3 percent of your target price, and many loan types and lenders require 5 percent or more.

• FHA loans. The CFPB says FHA loans allow down payments as low as 3.5 percent. Mortgage insurance is required on all FHA loans.
• Conventional loans. If you put down less than 20 percent, the CFPB notes you'll typically need mortgage insurance.
• 20 percent down. Not required, yet it can lower your monthly payment and avoid mortgage insurance on a conventional loan.

Here's simple math. For every $100,000 of purchase price, 3 percent is $3,000 and 3.5 percent is $3,500. Multiply by your price range to see your starting point, then ask a lender which loan fits you.

If family wants to help, see Can My Parents Help Me Buy My First Home in California?.

Earnest money is your good-faith deposit. The CFPB describes it as a deposit a buyer pays to show good faith on a signed purchase contract. It's typically held by a third party, such as escrow or a title company.

The amount and due date are set in your purchase agreement, so have it ready to send soon after your offer is accepted. At closing, the CFPB says it may be applied to your closing costs or down payment. It's part of your total, just paid early.

Your contract also spells out when the deposit is returned and when it could be at risk. Ask a real estate attorney if you have legal questions.

Closing costs cover your loan fees, escrow, title, recording and prepaid items like interest, insurance and property taxes. They depend on your price, your loan and your contract, so your lender's Loan Estimate is the first real number to trust.

I walk through each line in What Will I Pay at Closing as a First-Time Buyer?.

One more thing to plan for after closing. The Orange County Treasurer-Tax Collector explains that new owners usually receive a supplemental property tax bill after a purchase, and mortgage companies don't usually pay it from an impound account. Set money aside for it.

Inspections. You usually pay for these during escrow, before closing. Many buyers add sewer line, roof, termite or chimney inspections to the general inspection.

The appraisal. Ask your lender whether you pay it up front or at closing.

Reserves. Some lenders and loan programs want to see money left in your accounts after closing. Ask your lender early whether your loan has a reserve requirement, so you don't spend that money on the down payment.

Your own cushion. Separate from any lender rule, the CFPB suggests keeping an emergency fund of at least three to six months of expenses before you decide how much to put down.

Moving and setup. The CFPB also lists moving costs and renovations as things to set aside for. Think movers, utility deposits, window coverings and early repairs.

There can be. CalHFA's MyHome Assistance Program is a deferred-payment junior loan for eligible first-time buyers that can be used for down payment and/or closing costs. It offers up to the lesser of 3.5 percent of the price or appraised value on CalHFA government loans, and up to the lesser of 3 percent on CalHFA conventional loans.

CalHFA income limits apply, and buyers must complete homebuyer education and get a certificate. Programs and funding change often, so ask a CalHFA-approved lender what's open right now.

You can also ask about seller credits toward closing costs when we write your offer. This is general information, not financial or tax advice, so check your plan with your lender and a CPA.

If you'd like to know your real savings target, I'd love to map it out with you and connect you with a lender for a Loan Estimate. Call or text me at 714.366.8575 | DRE: 01397168, or contact me. Jeanette Nelson is a REALTOR® with Jeanette Nelson Real Estate, Keller Williams Realty, serving Orange County, Huntington Beach, Costa Mesa, Fountain Valley, and surrounding areas.