Buying a home for the first time is very exciting, but if you don’t know what to expect it can get a little overwhelming. I’ve found it best to be upfront about the upcoming steps and costs associated with purchasing a home.
When you find your dream home and the Seller accepts your offer, you will write a check for Earnest Money. Earnest Money is money paid to confirm a contract. This money is usually held by the closing attorney for the Seller and will go towards the Buyers closing costs or down payment of the house. You are not “losing” this money, it’s basically saying that you are not going to back out of buying the house without cause.
The inspection cost is based on the size of the home. Inspectors will go to the house and give you a laundry list of what is wrong with the house and what needs to be addressed/fixed. Don’t let the inspection process scare you out of your purchase, even new builds have a list of repairs.
Appraisal fees are sometimes required in advance but sometimes the appraisal is part of your Closing Costs. If you are obtaining a loan the lender will order an appraisal to make sure they are not loaning you more than the house is worth.
Closing Costs are fees paid at the completion of the transaction that are associated with the lender and title attorney’s fees. The closing costs vary from home to home depending on the purchase price and area but are typically around 3% of the purchase price. We will normally negotiate for the Seller to pay your closing costs.
Title insurance is very important because it protects the lender and the buyer if future claims are filed against previous owners. All lenders require title insurance. While the expense for the policy is negotiable, in many cases the seller pays the expense. On new construction, it is most always a buyer expense. The cost of the policy will vary by county and state. In this area, a policy will usually cost approximately .004 of the loan amount.
There are loan options that require lower down payments. For example, some loans will allow as little as 10% down but will require PMI. There is an FHA loan that only requires 3.5% down, of course with PMI. And there is TSDA money available on qualified homes in certain areas, usually more rural, that will be a 100% loan. Some lenders may offer doctor loans where the down payment is low or zero. There are a couple plus sides to putting down more money when you buy a home. When you put down 20% or more, you eliminate PMI (Private Mortgage Insurance). Also, the more you put down the less your monthly mortgage payment will be.
Buyers are responsible for paying for HOA transfer fees, administrative fees, capital expenditures at closing. Check with the particular Community HOA for these amounts.
Buyer will be responsible for paying for their Homeowners Insurance at closing with the company of their choice.
When buying a home the Buyer pays Nothing! Realtor commissions are paid from the Sellers side of the transaction. (Please note: Homes which are “For Sale By Owner” may be handled differently.)
I hope you find this information helpful and congratulations on your future home!
Disclaimer: Please note that these explanations are the basic guidelines and deemed to be accurate but there may be some variations.
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