What To Budget for When Buying
The four major items that buyers should expect to budget for.
We recently had a client that was curious about the cost of buying a new home. Here are the four major items you need to budget for when purchasing a new house:
1. Down payment. In the past, we’ve talked about loan types that do not require money down, but some loan types are better if you have a down payment. It doesn't necessarily have to be 20%, but if you have the money, we recommend putting it down.
2. Earnest money. This is money you pay as a show of good faith when making an offer on a house. This deposit works like a credit. You're using some of the money that you've already saved up for your purchase to show the seller that you are committed and serious about their house. This isn't an additional expense because it'll come back to you at closing.
3. Inspection costs. This isn't mandatory, but it's recommended and will cost about $500 for the home inspection and $75 for the pest inspection. I've seen many inspections reveal things that were unknown to everyone. In my opinion, they're worth every penny.
4. Closing costs. These are fees that are charged during a transaction by third parties, not your real estate agent. They generally include loan origination, title fees, and prepaid items such as escrow deposits for taxes and insurance. In a seller’s market, closing costs are traditionally a buyer's expense. These costs can range widely based on your sales price, but budget for about $6,500 to $7,500.
Feel free to reach out to my team by phone or email to get the process started. We look forward to hearing from you.