Upfront Costs When Buying a Home
Ok so you are ready to jump into homeownership. What are the upfront costs involved when buying a home?
Earnest Money
The first upfront cost you will need to cover is the Earnest Money. This deposit is made as good faith to purchase a home. It is typically paid to the escrow or title company within 3-5 business days from the time in which an offer has been accepted and becomes a fully executed contract. The amount of this is negotiable; however, it is normally anywhere from 1-3% of the purchase price. Earnest money is credited towards your closing costs and/or downpayment at the time of closing. You could potentially lose your earnest money if you breach the contract however, this is fully refundable during the contingency periods of a contract. This means that if you withdraw within the allowable time frames in the contract, your earnest money will be returned to you.
Upfront lender costs
Lenders usually have you pay for a credit report at the time of submitting an application for your mortgage. Credit reports will cost between $100-$150. Appraisals, which are ordered through your mortgage lender, are also part of the upfront costs when buying a home. An appraisal typically costs between $800-$1,200. Each lender has different policies about which costs they charge for upfront. Good to ask your mortgage advisor.
Property Inspections
This is such an important part of the home buying process and is a cost that you will not get back if you decide not to purchase the home. It is, however, money so well spent! The cost of the property inspection itself depends on the size of the home and whether it is a single-family dwelling, condo or townhome. A whole-house home inspection could cost between $650 and $1,250. Sewer, radon, mold, septic, and tank sweep inspections are all other common inspections in our market. Not all are relevant to all homes and locations. The cost of these varies from $150-$350 each.
Down Payment
The largest upfront cost you will have when buying a home, is the down payment. Be sure to get a clear indication of the down payment required by your lender for the program in which you are interested and/or qualified for. You will also want to know what kind of documentation your lender requires to verify the funds you are using for this down payment. Although the downpayment is considered an upfront cost when buying a home, you will normally pay this at the time of closing whereas the others are paid a bit in advance of the closing dates.
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