There are many things to consider when you are looking to purchase a home. Sometimes consumers can get so caught up in the emotional part of buying a home that they forget about the financial aspects of this major purchase. The cost of buying a home is more than the financing of the house through the bank or mortgage company. These additional costs will be discussed in this article.
- Down Payment. Depending on the type of financing you use for purchasing your home there can be various differences in down payments for example:
VA-No down payment
FHA-As low as 3.5% down payment
Conventional Loans-up to 20% down payment (20% =Avoiding Private Mortgage Insurance)
- Earnest Money. This is the money that you pay upfront along with your purchase contract that tells the seller that you are serious about purchasing the property. If you decide for any reason other than the ones specified in the purchasing agreement not to buy the house, the seller can then come after your earnest money. The amount varies depending on the seller as well as yourself. Just remember that all things in the real estate negotiations process are negotiable.
- Home Inspection. A home inspection is not mandatory and especially in new homes some builders and realtors will try to dissuade you from doing a home inspection. Believe me when I tell you, this will be some of the best money you have ever spent. Imagine finding out 10 days after you close on a house that the roof is severely damaged and there is a problem with the foundation. The costs of either of these problems could be pretty expensive. Spend the $250 to $500 on having the home inspection this will give you negotiating room if there are problems and help you sleep better at night.
- Closing Costs. Closing costs are usually around 3% of the cost of the home. For example if you paid $100K for a house then your closing costs would be $3000. Because we are currently in a buyer’s market, most buyers will be able to get some assistance if not all of the closing costs paid for by the seller. If you are not that fortunate and still want to move ahead with the purchase, then this cost has to be factored in.
- New Purchases for the home. Whenever you move into a new place, there are many items that you will need. Depending upon what you are moving from you may need new furnishings. This can be a big expense depending on your needs. You should plan ahead for the amount you want to spend to make these purchases. A good way to minimize this expense is by doing your purchases one room at a time over a certain period.
There are many things to think about when purchasing a home. Having a financial plan for covering your expenses will make the process a lot less stressful. Happy home shopping!!!