TYPICAL COSTS WHEN BUYING A HOUSE

UPFRONT COSTS:

Good Faith Deposit (EMD): The Earnest Money Deposit shows the seller that you are serious about buying their home. This amount is generally between 1% - 3% of the contract price.

Home Inspections: The home inspection costs will vary depending on the size and age of the home. Expect to pay between $400 – $700.

Home Appraisal. The appraisal is required when getting a mortgage. The appraisal fee is typically $500+

HOA Application Fee. This fee, if it is required, comes directly from the HOA and covers administrative costs to review your application. It is generally $100 or less.

CLOSING DAY COSTS:

Down Payment. Not to be mistaken with the initial deposit. The down payment can be as low as 0% of the purchase price depending on the loan program you qualify for. Lenders typically have 3%, 5%, 10% down payment products available. To avoid paying Private Mortgae Onsurance most Lenders require 20% down.

Title Insurance Policy. A title insurance policy is required when getting a mortgage. A policy for a $400K home would run around $2,300. 

Closing Fee. This is the fee the title agency or attorney’s office charges to perform the closing. This fee typically ranges from $400-$800 and can include courier fees, recording fees, lien search fees, etc.

Property Survey. The fee is typically $300-$500 depending on the size of the property.

Documentary Stamps & Intangible Tax. These fees are charged when you are getting a new mortgage. These fees are based on the mortgage amount as follows: Doc stamps = .0035 x Mortgage Amount; Intangible Tax = .002 x Mortgage Amount.

Homeowner’s Insurance Policy/Escrow. If you are purchasing a home with a mortgage, you will be required to secure a home insurance policy to protect the home and property against damage and liability. Home insurance costs vary significantly. It is best to reach out to an insurance agent as soon as you get a house under contract to determine how much your policy will be. If you are getting a mortgage the lender will require the 1st year policy to be paid at that time. Depending on how much your down payment is you could also be required by lender to add 3 - 6 months of payments into an escrow account as cushion and will be disbursed on your behalf when the policy renews.

Property Tax Escrow. If you put down less than 20% of the purchase price, lenders typically require the buyer to add 3 - 6 months' worth of property tax payments to their escrow account. These funds will be disbursed on your behalf when the lender pays your next property tax bill. (They use the previous year's tax bill as a guide for how much to collect.)

Mortgage Insurance (PMI) Policy/Escrow. As above, if you don’t put down at least 20% the lender may require mortgage insurance for the loan. You will have to pay the premium in full for the first year and then add a 3 – 6-month cushion depending on the type of financing you use.

Lender Fee’s. These are fee's the lender charges you to put together your loan. Some of these fees are for your credit report, processing the loan & pre-paid interest. The lender is required to provide you with a Good Faith Estimate upon submitting your application that shows these fees and others mentioned within this post.

HOA Pro Ration/Condo Fee’s. These fee’s are typically paid in advance, so the seller has probably already paid this fee for the year, quarter or month. Whatever the seller has already paid, that you will now be benefiting from, will need to be repaid back to the seller at closing.

Miscellaneous Fees. These fees can vary depending on each lender, but if you see an application fee or rate lock fee you can ask the lender for clarification.

A good rule of thumb to guesstimate your closing costs is to figure 3% of the purchase price. While this isn’t an exact science, it will give you somewhat of an idea of what the total cost could be. Then add your down payment percentage on top of that. Voilà!

While you may have enough in savings to cover the closing costs and down payment, the lender may require you to also have a minimum of 6 months of mortgage payments in your savings. There are certain ways to get help covering closing costs, but they will still cost you something. You could ask family member for help, or you could ask the seller to contribute. Another source of funds are local government grants and down payment assistance programs set aside for individuals with certain income and credit limits.