Many home buyers wonder how much cash they will need in order to purchase a home. Here are some guidelines in order to be more prepared as you begin the process.
1. Upfront costs:
Once your offer is accepted on a home, you will need an Earnest Money Deposit (EMD) to show the sellers that you are serious about buying their home. This amount is usually around 1% of the purchase price of the home, and goes towards the cost of the home. It is typically held in an escrow account until settlement.
In most cases buyers will need to hire a home inspector to make sure the home is in good condition. This amount can vary but usually falls between $250-$450.
The appraisal fee is required by most mortgage companies in order to approve the loan. This typically occurs in the first two weeks after a ratified contract, and ranges from $350-$450. Note: This can be paid upfront or at settlement.
2. Down Payment:
This is the biggest initial expense when purchasing a home. The amount is variable depending on what type of loan you are using, but the typical amount for a conventional loan is 20%.
3. Additional costs due at closing:
At closing there are some additional fees that can be due including lender fees, title fees, title insurance, prepaid insurance and property taxes, prepaid mortgage insurance, government recording and transfer charges. Some of these can be rolled into your loan or will need to be paid at closing, depending on your lender and title company.
Although all of this information can help as a guideline when preparing to purchase a home, your lender will be able to give you more specifics when you receive your loan pre-approval.
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