I want to talk about how much you can expect to spend during your home buying process. A lot of people I know are hesitant to move forward in purchasing a home because the cost is unknown. They don’t know how much they need to save to go through this buying process.
Now, aside from the down payment that you will discuss with your local lender, there are loan programs that are zero percent down, VA or USDA, or you can do FHA or conventional which is 3%, 3%, 5%, 10%, 15%, 20% however much you want to put down. That is definitely something to talk to your local lender about.
But aside from that, the other costs that you can expect are the earnest money, the appraisal, and the inspections. The earnest money is basically a deposit you put down on the house that lets the seller know you’re serious. It’s different in a lot of areas how much the “norm” is for earnest money. In this area we see a lot being $1000 no matter what the purchase price is. In some areas it’s a percentage of the purchase price, some areas are more some areas are less. It is something that can be negotiated in your offer. That is an amount that down the road can be put toward your closing costs or you can sometimes get it back. So, it is not really a cost, but it is money you will have to have during the process. The title company will hold the check and if something happens and the deal falls apart – that’s a whole other video – we’ll get into that another time. So, $1000 earnest money.
But anyway: the second cost is the inspections. I always suggest getting a home inspection. The inspector I refer my clients to, if the house is 1000-3000 square feet the cost is $350 – well worth it! Especially if he finds things you need to request, it really avoids a lot of issues and gives you a lot of information. So you’ll definitely want to do that. $350.
The next thing is the appraisal. Now the appraisal: sometimes the lender will order and pay for the appraisal and you will reimburse them for it in the closing costs. Sometimes you’ll pay it up front. Make sure you talk to your lender about that. But that’s another potential cost.
So we have the $1000 earnest money, $350 inspection, and $650 appraisal; that’s $2000. Again, that can be a little more or less depending on your situation.
Next is closing costs. So for closing costs, we estimate that it’s 3% of the purchase price. With this, it can really go different ways depending on your situation and your offer. Its something that potentially you don’t have to pay any closing costs; you can request the seller to pay the closing costs in your offer, you can come out of pocket and pay it yourself, or you and the seller can split it. Your Realtor and your lender will discuss those options with you and then between each other how to write your offer to best represent you and your needs. So if you don’t have the cash to pay for closing costs, or don’t have a lot of cash, or don’t want to spend the cash you do have; you can work ways around that. It’s all dependent on your situation.
In general, the costs you will need to cover are the earnest money, the inspections, and the appraisal.
All of this and more information is available in my Buyer’s Guide, so if you’d like a copy of that, slide your email address in my DMs and I will forward it to you. I’m never going to say that again. Or you can let me know in the comments and I will send it over to you, or if you would like to talk about it, give me a phone call 719-466-9828. Until then, talk to you later.