I have my 3 1/2% down payment so I'm ready to buy a house, right!? Maybe not...

Real Estate Agent with Keller Williams Realty

Working with first-time homebuyers means you need to be patient, have the right attitude and, most of all, it means you need to be an educator.  With the constant outpour of news on how bad the market is in addition to the horrible reputation real estate agents are given, it's only natural for their knees to be knocking from the horror of what they're about to face.  Trust me, FTHB's, it's not as bad as you may think!  I honestly think you should turn off your radio and t.v., stop listening to the national media and just talk to a local real estate specialist.  It's a great time to buy and, with the right agent, the road will be smooth with minor-to-no bumps and, if you're lucky, it may even be a little fun!  Purchasing your first home is a huge undertaking and an extremely important decision in your life, but it should also be an exciting time in your life!  If you're fully educated and informed of what to expect prior to finding a home, it takes the stress (for the most part) out of the transaction.  Here are some important expenses I think homebuyers may not think about when planning a purchase and should be aware of:

Down Payment - if you're going the FHA route, your down payment will be at least 3 1/2% which can be 100% a gift; if you're going the Conventional route, your down payment will be at least 10% and half of this has to be your own money with the other half being a gift (if you wish); 

Earnest Money - around 1% of the sales price, paid for upfront to show you're "earnestly" interested in the home.  This goes to the Title Company as soon as the contract is executed, this will be cashed and reimbursed to you at closing;

Option Money - depending on the sales price, can range from $50-$300+ (I always ask for $100 for a 10 day option but, as in everything in real estate, is negotiable). This is paid to the seller to allow an "option period" in which you can back out of the transaction for any reason.  This is also the time in which you have your inspection and negotiate repairs made by or paid for by the seller.  The option money must be delivered to the seller or listing agent within 2 days of the contract being executed, this will be cashed and reimbursed to you at closing;

Closing Costs - depending on the sales price, closing costs will range between 3 and 6% of the sales price.  This amount is in addition to your down payment and can be negotiated as to who pays for it.  If you're doing an FHA loan, the seller can contribute up to 6% towards closing costs (which basically pays for them), if you're doing a Conventional loan, the seller can pay up to 3% unless you're putting down 15% or more, at which point the seller can pay up to 6%.

Inspection - during the option period I always recommend getting the home inspected.  Depending on the size of the home and whether there's a pool or not, the inspection will cost between $350-500.  If you wish to have the home inspected for termites as well, expect a $50-100 increase.

Appraisal - this can be paid for at closing, however, some lenders require for this to be paid for upfront.  Again, depending on the size of the home, the appraiscal can cost between $300-500.


A lot of people save 3 1/2% and think they're ready to buy a home.  I hope this helps with what to expect when purchasing your new home!

Posted by

Britney Elizondo

Buyer Specialist, REALTOR® | Vicki White Homes | a team within Keller Williams Dallas City Center | www.vickiwhitehomes.com


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Collette Sarmento
Cameron Real Estate Group - Wakefield, MA
781*258*9718--Your Agent For Life

Great tips to pass on!  Love working with 1st timers!

Oct 15, 2010 04:51 AM #1
New Realtor

Thanks for sharing. Quick question regarding the option money.

Who is it made payable to?

Oct 15, 2010 05:45 AM #2
Britney Elizondo
Keller Williams Realty - Dallas, TX
Your Dallas Home Buying Specialist :: 940.453.5308

Oh sorry, did I leave that part out?  It's made payable to the seller.

Oct 15, 2010 05:59 AM #3
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Britney Elizondo

Your Dallas Home Buying Specialist :: 940.453.5308
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