The cash it takes to close on a $500,000 Long Island home
*Preapproval says you can borrow. The closing table asks what you can bring. Those are different questions, and the second one ends deals.*
Take a $500,000 purchase, a common first time price on our island, and walk the cash requirement line by line, path by path.
The down payment options
Twenty percent down is $100,000. Ten percent is $50,000. Five percent is $25,000. Below twenty percent, plan for mortgage insurance in the monthly payment, a cost that exists to let you buy sooner, and worth it for plenty of buyers.
The cash on top
Closing costs on Long Island generally run about 3 to 5 percent of the price for a buyer: lender fees, title insurance and searches, recording, your attorney, and the escrow deposit the lender collects up front for property taxes and insurance. On $500,000 that is roughly $15,000 to $25,000, and it does not care how big your down payment was.
No mansion tax at this price. That arrives at $1,000,000 and is a story for another page.
Three totals, plainly
Worst case planning, 5 percent down: about $40,000 to $50,000 cash. Middle, 10 percent down: about $65,000 to $75,000. Best funded, 20 percent down: about $115,000 to $125,000. A savings account that supports one path comfortably beats one that barely supports a bigger down payment with nothing left, because the reserve after closing is what lets you say yes to the furnace that fails in year one.
The number after the number
Whatever path you pick, plan to close with a reserve still in the account, not a zero balance. Lenders often want to see reserves anyway, and life certainly does: the first year of any house finds a way to bill you. A comfortable close beats an impressive down payment that leaves nothing behind it.
The monthly side
The same $500,000 at 20 percent down carries roughly $3,500 a month once property taxes and insurance join the loan payment, using the assumptions stated on the affordability calculator. Type your own monthly comfort number there and it hands the price band back to you, which is the direction the math should run.
When you are ready to test a real budget against real listings, ask. No forms first, that is the house rule.