How Much Money Do You Really Need in Order to Buy a House in Westfield, Indiana?

Westfield is one of the fastest growing communities in Indiana. It was recently named the 6th fastest growing city in the US. It has seen significant development in recent years including restaurants, breweries, local shops, and Grand Park. It has also ranked in the top of several “Best Places to Live” lists in recent years – along with Carmel, Fishers, and Zionsville. With all the attention this city has been receiving, buyers have been flocking here. With demand for housing in Westfield much higher than other parts of Indiana, I’m sure you are wondering – how much does it really cost to purchase a home here? In this article, we will explore the housing market in Westfield and dive into all of the costs of buying a home, including closing costs. Furthermore, we will compare various mortgage options, including FHA loans and conventional loans with 5%, 10%, and 20% down payments, to provide insights into the options available to homeowners.

Westfield's Housing Market:

Located in Hamilton County, Westfield, Indiana offers a desirable living environment with excellent schools, recreational amenities, parks, restaurants, breweries, and a strong sense of community. As of recent data, the average home price in Westfield hovers around $450,000. However, home prices can obviously vary depending on factors such as location, size, condition, and market trends.

Cost Considerations:

When purchasing a home, it is essential to consider not only the purchase price but also the associated costs. These expenses include down payment, closing costs, property taxes, homeowner's insurance, and ongoing maintenance and utilities. To estimate the financial requirements accurately, let's examine a few different common mortgage options buyers use:

1. FHA Loans:

Backed by the Federal Housing Administration, FHA loans are designed to help first-time homebuyers with more flexible eligibility criteria and lower down payment requirements. With an FHA loan, homebuyers can expect a minimum down payment of 3.5% of the purchase price. For a $450,000 home, this amounts to $15,750. Additionally, FHA loans typically require mortgage insurance premiums (MIP) throughout the life of the loan, increasing the overall cost of the monthly payment.

2. Conventional Loans with 5% Down Payment:

Conventional loans, which are not backed by the government, often require a higher down payment compared to FHA loans. A 5% down payment on a $450,000 home would amount to $22,500. However, a lower down payment would typically result in higher monthly mortgage payments and possibly the inclusion of private mortgage insurance (PMI), which adds an additional cost to the borrower per month. PMI falls off when the homeowner reaches 20% equity through mortgage payments.

3. Conventional Loans with 10% Down Payment:

Increasing the down payment to 10% reduces the loan amount and can help avoid the need for PMI. With a 10% down payment on a $450,000 home, buyers would need to provide $45,000 upfront, which may require additional savings or resources. Because the down payment is less than 20%, you will still have the monthly private mortgage insurance payment every month until you reach 20% equity through your mortgage payments.

4. Conventional Loans with 20% Down Payment:

A 20% down payment is often considered the gold standard for homebuyers, as it eliminates the need for PMI and reduces the loan amount significantly. For a $450,000 home, a 20% down payment would equal $90,000, which can be a substantial sum for many buyers. However, a larger down payment will result in lower monthly mortgage payments and long-term savings. Most first time homebuyers don’t have the money saved for a 20% down payment and often opt for lower down payment options.

In addition to your down payment, closing costs are an important consideration when buying a home. These costs typically range from 2% to 5% of the purchase price and include various fees such as loan origination fees, appraisal fees, title search fees, attorney fees, and prepaid expenses like property taxes and homeowner's insurance. Often times a lender will lump property taxes and homeowner’s insurance into your monthly payment – or “escrowing” your mortgage. For a $450,000 home, the closing costs could amount to approximately $9,000 to $22,500. It's crucial for homebuyers to budget for these expenses in addition to the down payment and other ongoing costs.

As you can see, the cost of purchasing a home extends beyond the purchase price itself. It is essential to consider additional expenses such as down payment, closing costs, property taxes, and insurance. In the end, you can expect to need around $35,000 - $45,000 saved up to buy the average home in Westfield at $450,000 to be used towards closing costs and your down payment (if you put 5% down). Keep in mind there are plenty of homes available to buy under $450,000 as well, and if your budget is lower than $450,000 you won’t need quite as much money saved up. As always, if you have any questions please let me know - even if you aren’t quite ready to buy or sell.