Budgeting to buy a home, whether you are a first time buyer or seasoned pro, can be quite an undertaking. When you hear someone talk about saving to buy a home, they are usually referring to the down payment. While this is a large chunk of change, the down payment isn’t the only upfront cost involved in purchasing a home. Here is a list of other costs associated with purchasing a home that you will want to include when budgeting to buy a home.
Earnest Money Deposit Typically about one percent of the price of the home, this is money that you deposit into an escrow account (usually a title company you will use to purchase the home holds the account) when your offer is accepted by the seller. You will pay this before you purchase the home. When you are budgeting for a home, make sure that you have the cash available for this cost. It is not part of the down payment.
Home Inspection Buyers are responsible for paying for the home inspection. The cost can vary depending on the size of the home, but it typically ranges from three to five hundred dollars. If you are budgeting to buy a home, this will be a cost you will incur.
Water Quality and Septic Inspection Homes that have septic systems are usually required to be inspected by a qualified professional before the mortgage company will lend the money for the home purchase. For budgeting purposes assume that you will need around one hundred fifty dollars for the water quality testing. Septic inspections vary depending on the type of system in place. Remember to ask your Realtor® for vendor recommendations so that you can compare costs.
Credit Report Fee In order to qualify for a mortgage, a lender will run a credit report and charge you for it. Though small, usually twenty to thirty dollars, add this into your costs when budgeting to buy a home. Some lenders will roll this fee into your mortgage, but I would rather just pay it upfront than have to pay it plus interest.
Appraisal An appraisal is a mortgage requirement from a bank. A third party professional will assess whether the home you are purchasing is worth the amount that the bank is going to lend. The buyers always pay for the assessment and it costs anywhere between three to five hundred dollars. You can pay for this at the time of service or on closing day.
Closing Costs This is an umbrella term used to describe all of the fees associated with completing the research and paperwork necessary to purchase the home. These fees are from the title company, any attorneys used, county or state taxes, and insurances. Closing costs typically are two to five percent of the purchase price of your home. This, next to the down payment, is probably the biggest cost you will have when purchasing, so make sure to include it when you are budgeting to buy a home.
Down Payment The down payment is a large portion of money that you will pay immediately for your home. Most people will save for this cost first when budgeting to buy a home. Depending on the loan program that you use, the amount of money that you need for a down payment can differ.
Knowing about all these costs and having the funds ready to cover them can really help to avoid any stress and surprises during the home buying process. Always talk with your Realtor® if you are ever unsure about when or how much you will be charged for a service.
From budgeting to buy a home to closing day, I am here to help. Grab more first time home buyer resources here.
