September 23, 2022
OUT OF POCKET EXPENSES when purchasing your home
by Rosemary DeLaurentis
Article written by Rosemary DeLaurentis
Day 1 of 7 – HOME BUYER SERIES and how I help my wonderful home buyers.
One of the first questions I get asked when working with my buyers is, “How much out of pocket costs will I have in buying a home?” GOOD QUESTION!
Since ALL of my buyers have already met with a lender BEFORE they meet with me (I have a list of lenders who I believe are some of the best in the business. If you need a lender, please reach out), they know how much money down they will need for their specific loan i.e., 3%, 3.5%, 5% or 20% down or more if they want a smaller house payment. So their questions are geared towards other costs that will arise and specifically what cash they will need to have on hand when they put in offer. Below is a list of costs that will definitely arise:
#1 your earnest deposit. If you are purchasing the home with a loan, the ‘average’ earnest deposit is 1% of the offer price or purchase price. If you are an investor and are paying cash or have a hard money loan, it is usually expected to put down 10% of the purchase price in an earnest deposit.
The earnest deposit will be sent to the title company to hold that for you in escrow. Your earnest will be applied to your cash to close at your successful closing.
#2 home inspection. I suggest all of my buyers have a home inspection. This will be an out of pocket expense for the buyer so you need to plan accordingly. I have a few wonderful home inspectors that I work with. To save my buyers time, I work to book the home inspection with the inspector of their choice.
Depending on the size of the property, if it has a pool or not and if they want additional inspections such as a termite inspection, the price can range from about $450 – $900.
#3 an appraisal. If my buyer is getting a loan, the lender will more than likely require that you have the home appraised. There are cases where the appraisal can be waived if the buyer has a large amount of money down and the property falls into some lender requirements. You would want to ask a lender what those requirements are. My most current listing’s buyer was able to get his appraisal waived and my most recent buyer under contract also had his appraisal waived. Both individuals put large sums of money down so as to have a low house payment.
An appraisal price also varies on the part of town, size of the property, kind of property – regular home, horse property, condo, etc. Depending on the lender, the appraisal cost will be asked for when ordered or later on. I have seen it both ways. Those can range from $500 on up.
#4 is your closing costs – this covers your escrow fees, lender fees, hoa fees and other items depending on the property. Your closing costs are NOT paid for in the beginning, however. They are paid at closing.
I hope this information helps you in preparing for a home purchase! I LOVE working with buyers and have geared my business to have a ‘balance’ of home buyers and home sellers in any given year. The reasoning behind that is so that I’m informed on a buyer or seller perspective within the current market. I don’t want to be lopsided.