The Up-Front Costs of Buying a Home

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You might be getting a mortgage for your new home, but did you know?  There are fees that you, the buyer, must pay prior to that new mortgage and prior to closing on your new home.  Buyers often ask "what money will I need up-front for this purchase?"  Here is what I tell them:

EARNEST MONEY

When you write a purchase contract for a home, there is deposit money usually required.  This is known as earnest money.  It tells the seller of the transaction that you are serious about this purchase and are willing to put some money at risk to secure it.  Think of it as a security deposit when you rent a home.  You make this deposit at the beginning of your lease, and typically you get that back when the lease ends.  Earnest money acts much the same way.  You make this deposit at the beginning of your purchase contract, and you typically get that back when you close.  The amount of earnest money usually depends on the price of the home.  While there is no set standard or amount for earnest money, we typically see it at about 1% of the purchase price.  Example...if you're buying a $300,000 home your earnest money deposit could be around $3,000.   But sometimes that amount can be negotiated.

HOME INSPECTION FEES

Once you are under contract for a particular property, you will probably get a home inspection done.   A home inspection allows the buyer to inspect the condition of the property they are buying.  Since the buyer benefits from this inspection, the buyer gets to pay for the cost of it.  A home inspection usually runs $300-400 depending on the age and size of the home. There are additional options for inspection which can add to that cost.  For example, if you choose to get a Radon test during the inspection you will probably pay an additional $130 for that.   Inspection fees are paid at the time of service.

APPRAISAL

Once you are past the inspection phase, your lender will order a home appraisal to ensure your purchase price is at market value.  Lenders usually collect the appraisal money up-front from you, the buyer.   Typically the cost of an appraisal can run anywhere from $450-$675 depending on the type of financing you are getting.  Government appraisals, for example, usually cost more than conventional loan appraisals.  Why?  Because government loan appraisals are a bit more involved. (I'd like to make a joke here but I should probably leave politics out!) 

MISCELLANEOUS COSTS

1. SLEEP   -   If you are normal, purchasing a home will probably cost you some sleep.  Most buyers tell me they wake up in the night anxious about their big purchase or excited to move in and decorate. So plan to lose some sleep while under contract.  You may find yourself wide awake in bed imagining where your furniture and wall hangings will go in your new home!  

2. COUNSELING   -  Buying a home can be quite stressful.   Your emotions will be heightened.  I've even seen people argue or cry during this process.  You may end up in the self-help section of your local bookstore or on the couch telling a counselor about your home buying ordeal.

3. SPLURGES FOR THE NEW HOME   -   No matter who you are, whether you've owned a home prior or not, you will at some point find yourself purchasing shower curtains or paint or supplies for your new house.  Call it the nesting instinct.  We all do it.  When you buy a new home you buy some new stuff, too.

YOUR DAY OF CLOSING

On this wonderful, much anticipated day you finally get the keys to your new home.  All those up-front costs are a thing of the past, and you will now enjoy the rewards of home ownership.   You may look back on your purchase and think "this was a lot to go through."    But hopefully, you can say like many of my clients have..."this was fun!"   If you have a good realtor/lender/inspector/team in your corner the process can and should be quite fun.

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