Interest rates continue to be at an all-time low, drawing more renters into the home-buying market. But what exactly does it cost to buy a home?
First, as always, do your homework. Speak to a mortgage lender to know your buying capacity and budget. This will give you a good snapshot of the basic costs. Now you can work with your Realtor and start your home search!
Once you are under contract, there are expenses to expect before you actually purchase the home. Here’s what to plan for during the home buying process:
1. Earnest Money: this is money that you deposit with the title company or brokerage to put towards your purchase. It lets the seller know that you are serious about buying the house. This happens within the first few days of the contract being signed, and usually equals 1% of purchase price.
2. Home Inspection: in most cases, buyers will want to have a home inspection on the property. Home inspections can range from $500-$1000. Cost can depend on size and age of home, systems in the home and specialized inspections (radon, septic, termite, etc). Inspections typically occur in the first two weeks of a contract.
3. Appraisal: your lender will order an appraisal on the home. Appraisers are independent, third parties who evaluate the home and let the bank know if the price is in line with the market. Appraisals are typically $500-$700. An appraisal usually takes place after the home inspection.
4. Closing Costs: this is a general term for many of the fees and expenses that are associated with getting a mortgage. These include origination fee, underwriting fee, and application fee. Plan for closing costs equal approximately 3% of the home purchase price.
5. Title: title expenses are from the title company to conduct their research on the property and issue any title insurance. This can be around $1500-$2000.
6. Down Payment: this is paid on closing day, but the mortgage lender will likely need proof of funds (aka a bank statement) before you are pre-approved. There are many types of mortgages, with most requiring a down payment equal to 3%-20% of purchase price.
This list will give you a good starting point to make a budget and a plan for your home purchase. Have more questions? Send me a note and let’s chat. -Jennifer