Costs of Buying A Home

1. Earnest Money

You will pay earnest money or a good-faith deposit toward the purchase of the property at the time of acceptance of the contract. The amount is usually $500 to $1000 on homes less that $100,000 and 1% of the price on homes above that. This payment will go towards the purchase of the property at closing.

2. Inspection

Although an inspection is optional it is highly recommended that you have one performed on the property. The inspector will check major systems in the home as well as the structure and let you know what problems the house has, if any. You can also get additional inspections including pests, etc. The cost starts at about $300 and goes up depending on the home size.

3. Appraisal

Your lender will require an appraisal and it will likely be your responsibility to cover the cost. The home must appraise for at least the amount you are offering to pay for it. If the property appraises for less, you will have to come up with more money down or renegotiate the contract because the lender will usually only loan up to 80% or 90% of the home value. The appraisal cost averages about $400.

4. Real Estate Attorney

If you have any question regarding your purchase contract it is advised for you to hire a real estate attorney to review the contract before you close on the property.They can also represent you at the closing.

The costs for an attorney range from $500-$1,500. Before you hire them ask whether they charge a flat fee or per-hour. If it’s per-hour then make sure to get an estimate of the final cost, and be sure to receive a full accounting on your bill.

5. Closing Costs

Closing costs are all the fees you will need to pay in order for the transaction to process and for you to take possession of your new home. These will be paid at closing. The buyer is usually responsible for:

Loan Fees & Down Payment: You will pay any fees associated with the type of home mortgage you will be getting and the down payment (usually 3.5% to 20% of the purchase price).

Escrow Account for Property Insurance & Property Taxes: With a loan, you will most likely need to pay to set up an escrow account. Think of this as a mini savings account that the mortgage company is going to use to pay your property taxes and home owners insurance at the end of the year. You will set it up with 14 days worth of interest for the loan, 2 to 3 months of property taxes, and 14 months of home owner’s insurance.

HOA Transfer Fee: If the property has an HOA association there is a fee to transfer the membership over to you, the new owner. This can be paid by the seller also. You can negotiate for the seller to pay some of these costs for you. An amount is agreed upon and this amount will appear as a credit on the HUD (the settlement sheet which includes a list of buyer and seller costs).

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