Aside from a down payment, what else do I expect?
Common Expenses in a Home Purchase
Of the following expenses, some will be optional and others will be part of the local custom for home buying in your area. Ask lots of questions and be sure you’ve prepared a little extra cushion for things that may pop up!
- Earnest Money/Good Faith Deposit. 1-10% of the purchase price. A deposit that counts toward your other costs.
- Down payment. 0% to 20% of the purchase price
- Home Inspection. $250-$500
- Sewer Scope. $99-150
- Various other inspections. $0- $500
- Closing costs & Prepaid expenses – Closing costs are one time expenses. Prepaid expenses are for future costs like homeowners insurance & property taxes. When you are shopping for a home, your realtor can help determine property tax. And be sure to shop around for homeowners’ insurance to get the best rate and coverage combination (and expect to pay these costs as a part of your closing fees).
- Credit report. $0-60
- Application fee. $0-$400
- Appraisal. $400-$800
- Origination fee. 0 to 1% of loan amount
- Underwriting fee. $250-$700
- Document preparation. $0-$300
- Processing fee. $0-$400
- Prepaid interest. Your loan interest covering the time from the close date to the end of the month – this will depend on when you close.
- Lenders title insurance policy. $250-$700
- Flood zone certification. $15-$90
Meet with your broker before looking at homes to estimate how much money you’ll need.
- Escrow or closing fee. $200-$500
- Attorney fees. $0-$600
- Prepaid property taxes. Property taxes typically run from 1-3% of the homes value. Your lender will require you to have 10-12 months worth of property taxes in your closing costs.
- Homeowners insurance. $300-$500
- Recording fees. $25-$120
- Excise fee or transfer tax. 0 to 2% of sales price
- Property survey. $0-$600
Many of these items are closing costs for your loan and you can negotiate to have the seller pay them for you, but be careful when you ask for that in your offer. If the home you want to buy is hot on the market, you need to consider carefully what things will set you above other potential buyers. Talk with your realtor and see if the buyer would be willing to cover closing cost or perhaps to split the cost.
The main focus is to be sure that you put back more money than just your down payment. Closing costs can be $5000 or more (and that’s on top of your down payment!) Some of this money you’ll need before you close, and other money you’ll need at the time that you close – but you don’t want to wait until the last minute to get your funds together if you are depending on gifts to come through because your broker will have to verify that you have the money before you’re able to close!