There is more to the cost of buying a home than its price. So, how much does it cost to buy a home? You will have several other expenses that you will need to consider and budget for, over and above the price of the home. Down payments, home inspections and surveys will add hundreds of dollars to the cost to buy a home. If you are prepared, you won’t blind-sided by the extraneous costs when you find your new home on Movoto or through your Realtor®.
Do you know about earnest money?
Typically called, earnest money, a down payment will be required when you find the home that you want and enter into an agreement with the sellers. Down payments can range from $500, or from one to five percent of the listed price. Your realtor can answer these questions for you and advise you of customary practices for your area. If you are going it alone, without a real estate agent, you will need to negotiate the down payment with the seller.
Either way,plan to seal the deal with a down payment. Your earnest money payment will go into escrow. At closing, the earnest money will be added to the down payment, giving you a credit for the paymen.
Do you need an appraiser?
Required by your lender, who wants an accurate value placed on the home on which they are lending, an appraisal runs between $250 and $600, depending on where you live. The bank will hire an independent appraiser to value your home but you it will cost you.
Will you have the house inspected?
Not a requirement, having a home inspection is good business. Even though sellers are required to disclose material defects in their home an inspector can save you thousands of dollars if they find a leaky roof or a faulty heat and air system. Typically $300 and up, home inspections are generally performed 10 to 15 days after the contract is signed. This gives the seller time to make any necessary repairs before closing.
Will you need a survey?
A survey is often required by the lender and will tell you exactly where the boundaries of your land are. Expect to spend several hundred dollars on a survey. The cost will depend on the size of the lot.
How much are closing fees?
Another expense for which you will be responsible is closing costs. It will take from two to five percent of the purchase price. These fees will go to the lender for miscellaneous expenses. So, for a home that cost $200, 000, you will need $40,000 for a 20 percent down payment and $4000 to $10,000 for closing costs.
Closing fees include:
- Appraisal Fee – The cost of the appraiser to evaluate your home value
- Credit Report Fee – The cost to your lender to run your credit report.
- Title services and title insurance for the lender – This is for the verification of the title to your home and insures the lender if there is ever a problem with your title.
- Tax Service Fee – Verifies if there are any unpaid taxes on the property.
- Lender Origination Fee – This is what the lender charges to process the loan.
- Recording Fees – The fee to record the deed, loan documents and mortgage on your home.
Have you also priced homeowners insurance?
If you currently own a home, you can transfer your homeowner’s policy to your new home. If not, you will need to acquire a homeowner’s policy prior to closing. The lender will want to be sure that their asset be covered before the ink on the loan pages is dry. If you are purchasing land that is in a flood zone, be prepared to pay a high premium for insurance coverage.
Have you shopped for a lender?
Comparison-shopping for a loan can save you thousands of dollars over the life of your mortgage. The Consumer Finance Protection Bureau states that if you shop with just three lenders you are more likely to find a better rate than if you go with the first lender with whom you speak. Finding a lender who can give a rate that is just a half a point lower than the competition can save you a lot of money.
Did you remember the Private Mortgage Insurance?
Some buyers can purchase a home with less than 20 percent down, however, the loan will be subject to private mortgage insurance (PMI). The cost of PMI is one-half to one percent of the loan amount. For a $200,000 loan you could pay as much as $2,000 year in extra fees if you don’t have a 20 percent down payment.
Are You Ready?
Now that you know approximately how much it costs to buy a home, are you ready? Closing costs alone, without the addition of surveys and inspections add thousands of dollars to what you need over your 20 percent down payment. Knowing the cost to buy a home will help you prepare yourself before you begin house hunting, will give you a more realistic picture of what you can afford, and are willing to pay for a new home.
2 Point Highlight
There is more to the cost of buying a home than its price.
Finding a lender who can give a rate that is just a half a point lower than the competition can save you a lot of money.
