Ive been seeing a lot of home buyers lately, especially first time home buyers, not knowing the Costs of Buying their new home. There are a lot out of pocket costs, not all of the money comes from the bank! I see buyers come in with barely enough money left over to get a home inspection, this scares me. How will you pay for your homes maintenance, your taxes, and everything in between? Your new home will come with many unexpected costs that most people aren’t aware of, Down payment, Home inspection, Closing costs and lender costs, Earnest Money put down in good faith toward your home, plus possibly some others. In turn, these need to be discussed with your lender, and your realtor so you are all on the same page, and you know that you can afford the house you’re buying and all costs that come along with it, and have some money left over for possible updates to the home.
This is Money put down on your Offer to purchase the home, this goes into a trust account, until after the home has closed. Earnest Money is put down to ensure the seller that you are, in good faith purchasing their home and are willing enough to put money down toward this purchase and ensures the seller you will not run away and never show up again, or default against the agreed contract. This amount is usually based off the purchase price of the home. 1%-2% is usually done. So if you are buying a $200,000 home, your earnest money the Offer would be around $3,000 dollars. This is in most times deposited into the trust account within 5 days of the accepted offer.
This is the Cash you have already, that will be your down payment to your mortgage lender on your loan. Most conventional loans require 20% down, but there are lots of different loan options out there that only require 3-5% down, and some times nothing down with a VA or USDA loan. Make sure you speak to your lender and find out the best loan for your personal situation. Everyones situation is different, they can give you all your options.
Next is the costs of a home inspection, obviously I’m very biased against this, and in my opinion everyone should get a home inspection on any home! You don’t know anything about the home, or what has possibly gone wrong. Ive seen bad inspections in new builds. This saves you lots of possible money problems in the future, by uncovering any possible issues before you purchase. The costs of a home inspection vary somewhat but around us, in the Sheboygan area, more than likely your cost will be about $300-$500, plus another $100-$200 if you are also testing the home for Radon-an odorless, cancer causing gas. This must be paid at time of the home inspection.
Closing costs are additional costs on top of your down payment. Your lender will have you bring a check to cover these at closing. These costs include the appraisal of the home ordered by the lender, Title fees, & Lender fees. These usually accumulate to approximately 2%-5% of your loan, depending on your lender.
All in all, it costs money to buy a home! Don’t let anyone tell you otherwise! Sometimes you may have that low down payment, but possible higher closing costs. Im not trying to scare anyone away from buying your new home, but making sure you’re aware of all costs before they creep up on you, and your in way over your head! Planning is your best option before even looking for your first home! That way you have all the money you need and can proceed looking for that perfect house without any worries!
Thanks for Reading… Sarah 🙂