Author Topic: How much to save for closing costs and emergency fund after closing?  (Read 509 times)

sizzlinkola

  • 5 O'Clock Shadow
  • *
  • Posts: 34
I'm looking to buy a $1M-$1.25M home in LA in 1-2 years and need to determine how much I should save for closing costs. I know there's closing costs calculators but which ones are reliable and accurate?

I'd also need to save up for a 6 month emergency fund incl the mortgage payment. But I'm not sure how I can predict the monthly payment so I have no clue how much I should be saving there.

Any advice there? I already have 6 mos of emergency fund but that's my current expenses.

secondcor521

  • Walrus Stache
  • *******
  • Posts: 6028
  • Age: 56
  • Location: Boise, Idaho
  • Big cattle, no hat.
    • Age of Eon - Overwatch player videos
Re: How much to save for closing costs and emergency fund after closing?
« Reply #1 on: October 23, 2023, 05:18:07 PM »
Your closing costs are going to depend on a lot of factors:  price of home, size of mortgage, kind of mortgage, how your contract splits costs between buyer and seller, how much earnest money you put down, day of the month you close on (affects the interest), and maybe some other things.  Probably the most accurate way to estimate would be to sit down with your (or a) real estate agent and go line by line through a HUD-1 / settlement statement and add it all up.

You can make a decent guess on the mortgage payment.  You can get the PI part by figuring out the mortgage size, length, and interest rate and putting that in any mortgage calculator.  Mortgage size will be essentially purchase price minus down payment.  You'll also have TI (taxes and insurance) which you can guestimate by looking at the existing property tax rates and the value of the home.  Insurance you can call your insurance agent - it'll depend on the specific location and characteristics of the home.

The other thing to try to guess at is how the home will impact other expenses.  Living in CA, if you're single, you might be able to deduct enough mortgage interest, taxes, charity, and other stuff to be able to itemize, which might reduce your income tax bill.  Commuting expenses might change if you're moving closer to or further from your job.

In the end it will be a big guess.  You might end up with 4 months savings or 8 months savings instead of the 6 you're targeting.  If so, just adjust as soon as you can after buying.

uniwelder

  • Handlebar Stache
  • *****
  • Posts: 2081
  • Age: 45
  • Location: Appalachian Virginia
Re: How much to save for closing costs and emergency fund after closing?
« Reply #2 on: October 23, 2023, 06:32:21 PM »
Besides considering the exact cost as outlined in the previous post, consider why you're so concerned with an exact number.  Its not the wisest decision to stretch yourself so thin financially to afford a house.  I'm assuming you've already tried out some calculators, so how far apart were they from each other?  I would hope they'd be close enough to each other not to really matter in your overall financial plans.

 

Wow, a phone plan for fifteen bucks!