Home Ownership: What are the real costs of buying a home?
A few weeks ago we wrote about the cost of selling a home, you can check out that post here http://www.jacksonvillehomes365.com/how-much-will-it-cost-to-sell-your-home/ . In this week’s #ProTipTuesday we will speak about what costs you can expect to pay when buying a home. There is the price of the house itself, that goes without saying and we can work with you to negotiate the best terms possible, but there are other costs too.
- Good Faith Deposit- 1%-3% of Purchase Price
After you have found a house you like and would like to make an offer, it is customary to also put down some amount for a deposit. Once the offer is accepted and the deposit paid, you enter into a 10-day inspection period, aka Due Diligence Period (per the contract we use). Starting the day after the acceptance date, you have 10 days to have inspections done and can back out of the deal, if issues are found, without losing your deposit. This amount will need to be paid out of pocket and is not added to the loan amount. Assuming everything goes as planned and you close on the house, the deposit amount is credited to you and is subtracted from the “closing costs” (more on that below) or the purchase price.
- Inspection- $350-$500 (Varies based on size and items inspected)
A home inspection is not mandatory, but we always suggest you get one. A professional will go over your prospective home from top to bottom and give you a detailed report of all defects. There is no substitute for the peace of mind brought by knowing exactly what, if anything, is wrong with the house. This is an upfront cost, that you will need to have money on hand for. There are various items that the basic inspection does not cover like pools, irrigation and Wood Destroying Organisms (WDO), but they can be added for additional costs. VA loans require an inspection for WDO, and a free and clear re-inspection to confirm that the issue has been fixed. For more information on Wood Destroying Organisms click here: http://www.jacksonvillehomes365.com/wood-destroying-organisms-more-than-just-termites/
- Appraisal-$400+ (Cost varies based on size and complexity of the job)
Unless you are paying cash for your new house, your mortgage lender will require you to get an appraisal done. You will be responsible to pay for that appraisal. A licensed appraiser will visit the house and determine the fair market value of the home. If it is determined that the home is appraised at a lower amount than the agreed upon price, negotiations begin again. This cost is added to the total amount of closing costs. For more on appraisals visit http://www.jacksonvillehomes365.com/whats-involved-in-a-home-appraisal/
- Miscellaneous Closing Costs – 3% of Purchase Price is the general rule of thumb
For a better approximation of the costs ask your mortgage lender. As we get closer to the closing date a more accurate amount will be known. This category includes the appraisal (as mentioned above), lender fees, title fees, bank wire(s), insurance, brokerage fees, and various other fees/costs. It is possible to request that a portion of these costs are covered by the seller. This essentially would allow you include the closing costs into the mortgage. While this request is often accepted, it is not guaranteed and makes the offer less attractive to the seller. If the seller agrees to cover a portion, they will receive that much less money for their home and are essentially discounting the house price.
- Down Payment – 0-99% of purchase price
The loan type determines how much if any money the lender will require you to put down. For VA loans you do not need to put any money down depending on credit. The bigger your down payment the lower your mortgage. For FHA loans the required down payment could be a low as 3.5%, and 3% for qualifying Conventional loans. It all depends on the house, your credit, your income and the lender. If you put less than 20% down with any non-VA loan you will have to pay mortgage insurance. With a conventional loan this can be removed, with government backed (FHA and USDA) loans it is permanent. The only way to be able to stop the insurance payments on government backed loans is to re-finance, which typically means more closing costs.
- Mortgage Payments- a Mortgage Lender or Website can approximate this amount for you
Your first Mortgage Payment is not due for at least a month after closing. Typically, it is due on the 1st of the month, so if you close very early in the month you may not have to make a payment for almost 2 months.
Because homes vary so much in size, price and location we are not able to give you an exact dollar amount. Hopefully this gives you a better idea of what you will need to set aside when thinking about buying a home, these are costs that many buyers do not think about prior to having a consultation with us. We want the only surprises along the way to be good ones.
