During the recent downturn in the real estate market it became commonplace - at least in my little part of the world - for Sellers to kick some money toward the Buyer's closing costs.  So, as it turns out, if the Buyer could scrape together the 3.5% for a down payment (assuming an FHA mortgage), the other costs like State and County transfer and recordation fees, lender fees, title company fees, hazard insurance premiums, prepaids like interest and the like would be paid for out of the Seller's proceeds at settlement.

This is wonderful news for the Buyers because it means that they really have very little in the way of out-of-pocket expenses and, if the qualify for a VA mortgage (zero down payment) it's possible they could buy the house for close to zero out-of-pocket money. However, no matter how hard I try, I can never get the home buying experience to equal absolute zero for the buyer.

A recent example comes to mind:  a VA qualified buyer found a home they wanted to purchase, we negotiated price and all the other financial terms, including a wonderful chunk of Seller money for Buyer closing costs.  It looked like it was going to be almost zero out-of-pocket expense for the buyer.  This was a good thing because the buyer didn't have a whole lot of ready cash.  The keyword here is almost.

There are certain expenses that most lenders do not include in their good faith estimate and, if they do, the lenders like to collect it up front.  The appraisal fee is one such expense.  The home inspection is another.  No matter what the Good Faith Estimate says, most lenders I know want to grab that appraisal fee up front because if the deal falls apart they still have to pay the appraiser. 

The home inspection is another place the buyer actually has to have real money.  The inspector usually likes to get paid on the spot.  You see, they know the deal might fall apart, too. In fact, it is well known that many inspectors kill the deal by pointing out defects in the house that worry the potential buyer just enough to want to back away from the purchase.  So, Buyers need to have a check or credit card ready and available at the time of the home inspection or the inspector may just pack up his or her gear and go home.

This is the "bottom line". Buying a house, under the right circumstances, can almost be done without much cash but you really need some money.  This is at it should be.  Consider if your were renting an apartment or house instead of buying.  There would be the first month's rent and the security deposit and the pet deposit.

There should be some "investment" (another term I hate and will probably write about in the future) into the purchase of the house on the Buyer's part.  Buying a house is a big deal and the decision shold not be made lightly.  Buyers should expect to have some cash lined up for the purchase.  There is no such thing as a free lunch.