You’ve started down the journey to home ownership – congratulations!
The costs of purchasing a home can be daunting, but if you’re prepared and have knowledge around what they are and how much (on average) you need, you’re in a better position. Here are some of the costs of purchasing a home that you’ll need to think about before you make any offers. I want to ensure my clients are in a strong financial position before they purchase – and by educating yourself around the financial expectations is a great start!
Down Payment – this is the biggest portion of what you’ll need to bring to the table. The % varies for each individual situation – starting as low as 3.5%. Talk to your lender about your financial situation and what makes sense for you. I’d personally recommend you have at least 5% of the purchase price in the bank prior to purchasing a home, so you won’t be wiped out by the down payment.
Closing Costs – your real estate agent should help you figure out the amount that you’ll need for closing costs, as it varies depending on the title company you use and the price of the home you purchase. On average, it’s about 2% of the purchase price.
Appraisal Costs – the buyer pays for the appraisal and your lender will order this as part of the lending process, as this is how they establish the correct value of the home. On average, it can be anywhere from $500-$1,000.
Inspection Costs – the buyer pays for the inspection as part of the due diligence of ensuring the property doesn’t have any major defects. The price of the inspection varies depending on the types of additional inspections you add onto a general home inspection. Some of those additional inspections could be:
- Air testing
- Environmental testing
Home Insurance – if you’re getting a mortgage on your home, your lender will most likely require you to pay your first year of homeowners’ insurance premium up front – on or before closing. Make sure to talk to your insurance provider to get some quotes and prepare for the cost.
Mortgage insurance (PMI) – if you’re putting less than 20% down, you will have private mortgage insurance. Here’s a great article that explains the cost of PMI – and the additional cost.
Have questions about your own home purchase journey?
Don’t hesitate to reach out to me, Catie Lawrence