Most everyone understands that buying a home means saving up for your downpayment and that you’ll owe the bank monthly payments for the next few decades of your life. What isn't talked is the other fees that are associated with buying a home once the sellers have accepted your offer.
You’ve signed the contract.. Now what? Let’s talk where all the money goes..
Downpayment. This is the large up front sum of money you will be paying to the bank to secure the home. It can be as low as 3.5% of the purchase price and shows your lender that you have some skin in the game. There are many programs out there right now that offer assistance programs with your downpayment, especially for first time home buyers.
Earnest money. This is your “good faith money” put into an escrow company as soon as your contract is accepted. Earnest money shows the seller you are serious about buying their home and ready to start your inspection period. A good rule of thumb is approximately 1% of the purchase price. This is credited towards your downpayment at close of escrow.
Escrow and title fees. A title company is a third party company who helps facilitate a real estate transaction. Their tasks include title searches (to make sure there are no liens, clouds, or encumbrances against the property), allocating funds to the correct parties and preparing all documents for transfer of the home. Their fees are based on the purchase price of your new home.
Lender fees. These vary based on the amount of your loan and can include things such as your appraisal and loan origination fee. Your lender can offer you a credit to help offset some upfront cost but this usually comes with a higher interest rate on your mortgage.
Monthly mortgage payments. This will be your monthly payment to the bank who holds your loan. Your mortgage payment includes your principal (loan amount), interest on your loan, property taxes and homeowners insurance.
Ask your trusted lender about assistance programs that help to cover fees such as downpayment and closing costs. Is 2017 your year to be financially ready to buy a home?
What my Clients Are Saying
“Exceptional.” She truly walked us through the entire process of selling our home from beginning to end. We really appreciated that there was always someone available to answer our many questions and very good at negotiating on our behalf. I would highly recommend her to anyone looking to sell or buy a home!