Many times buyers are not fully aware of all the costs involved in buying a home:
DOWN PAYMENT - The minimum down-payment is usually 3.5% of the purchase price. However, this can range from as little as 0% to as much as 20% of the price depending on the type of loan. There are some programs available that assist with down-payment depending on income, first-time home buyer status, and home desired.
CLOSING COSTS - Closing costs are the costs associated with purchasing the home, acquiring the mortgage, purchasing title insurance, as well as any state or city taxes involved. These costs vary by location and depending on your mortgage arrangements but usually run between 3% and 6% of the purchase price. Sometimes arrangements can be made to have the seller assist the buyer with some or all of the closing costs.
EARNEST MONEY DEPOSIT - This deposit is submitted with the offer. The deposit is held in escrow and credited towards the buyer’s down payment and/or closing costs. However, this check is cashed following acceptance of the offer. The seller may be entitled to the deposit if the buyer defaults on the contract. This deposit is usually a minimum of 1% of the purchase price and the amount may need to be increased in competitive situations.
HOME INSPECTION - This is paid for by the buyer at the time of inspection. The costs involved vary depending on the size and purchase price of the home but cost approximately $250-$500.
TERMITE INSPECTION - Many mortgages require a termite inspection. This can either be billed to the closing company and paid at the settlement table or paid for up front. The costs range from $35-$60.
OTHER INSPECTIONS - Any additional inspections that the buyer is interested in having done are paid for by the buyer. These may include radon inspections which can cost between $125 and $200, mold inspections, roof inspections, well water tests, septic system evaluations, chimney inspections, and anything else the buyer is interested in investigating prior to committing to purchase the home.
APPRAISAL - A few lenders will have the appraisal paid for at closing. However, many lenders will have the buyers pay for this up-front. That way if something goes wrong with the contract the lender is not stuck with the cost of the appraisal. This can vary in cost from approximately $350-$550.