I recently had the opportunity of showing a home for a couple that came to me from a listing inquiry. When I met with them they said they were pre-approved and after looking at the property they seemed to be very interested. The place was a townhome with HOA’s so I wanted to make sure they were accounting for this additional amount every month in the pre-approval. They mentioned that they were doing zero down financing and they were approved by their friend, a lender. Radar up, I inquired if they were utilizing a VA loan to which they replied, “no.” With growing concern I asked what special program they were using, to which they replied, “Just the zero down option.” They also shared that they had no money saved for closing costs as well.
Reluctantly I shared with them that they would likely not have chance of obtaining this property in the current market nor should they without a down payment, closing costs and rainy day funds. Recounting my own early home purchasing experience of a dryer catching on fire, a sewer main leaking under the house right after a dishwasher died with a new baby and a new job that required our of pocket COBRA insurance perfect storm served as a valuable lesson.
Even if this couple could find and qualify for an available program assisting with a down payment or closing costs, they were overlooking important factors to responsible homeownership. One needs to be able to save for emergencies. There is no calling in the landlord, afterall. What is the right amount to save before purchasing a home? It depends on the money you make, your industry stability, your lifestyle and your budget with overhead. The best part of getting pre-approved for a mortgage is understanding what you can handle at maximum. One need not push an upper boundary. Leave room for life. It happens not always as we plan or expect.