When I meet with new clients, the number one question that comes up is, “what do I need up front to buy a home?”. That’s a great question and it’s better to bring it up than assume you can’t buy. Before you totally rule out buying, here is what you would typically need to buy a home:
If you’re not purchasing a home with cash, you’ll need a mortgage pre-approval. This can be obtained by contacting a Mortgage Lender in the area. If you don’t have a lender in mind, be sure to ask your Realtor for some references. The best part is that getting a pre-approval is typically free.
Earnest money is a good faith measure that goes with the sales contract and is typically 1% of the purchase price. This proves to the seller that you “earnestly” want to buy their home.
Option money is about $150-$200 on average. This is given to the seller for them to take the home off the market a negotiated number of days in order for you to get your inspection done and decide if you really want the home.
Inspections depend on the square footage, but you are looking at $350-$450 as an estimate for a home inspection. If the home has a septic system you’ll want to get that inspected as well which could be around $400 or so.
Money for down payment
A down payment is usually between 3.5%-5% of the purchase price and your lender will be able to determine this. Some areas such as ours are still USDA eligible which is 0% down. There are also options for Veterans that are 0% down.
Most lenders will require your appraisal fee to be paid up front in case the sale doesn’t go through. This is typically around $425 or so on your average neighborhood home.
Closing costs come anywhere between 1%-4% of the loan amount. Depending on the circumstances, these can sometimes be negotiated into the sales contract.
This about sums up the costs that you’ll encounter up front. Did you notice that there wasn’t a fee for my services? That’s because you as a buyer don’t pay for your Realtor (what?!). The amazing part is that the seller actually pays all the Realtor fees so there should never be any reason to not use a Realtor to represent you. This all can be confusing especially if you have never bought a home before, so hopefully this helped clear some things up!
And remember that you know of anyone looking to buy a home, I would love to get the chance to talk to them!