Exactly how much money do you need to buy a house?

I have over the last year had several frustrated clients who have been confused by how much money they need to buy a house. They see signs, and adverts saying "Only 3.5% down needed". But in fact it is always more.

There are several additional add on costs to that 3.5% down that are needed.

1) Title Insurance - the mortgage company is going to insist that their interest is insured and you may choose to insure your own interest as well. The amount in PA is set by the state and depends on the price of the home and the mortgage.

2) Real Estate Transfer Tax, this can vary from state to state and county and township, for example it is 1% in many local townships around us for buyer and seller, but some charge 1.25% of the sales price. Philadelphia is much higher 2.5% to both sides.

3) If you are buying within a community that has a Condominium or Home Owners Association there may be a Capital Fund Contribution due from buyers that may equal 6 months or more of monthly dues, as well as paying the dues now due for the month of purchase.

4) Your mortgage has several associated costs, such as the credit report, an origination charge, appraisal, underwriting fees, flood certification, any mortgage insurance premium that may be due if you are borrowing 80% or more, plus interest for the remainder of the month in which you purchase that can add up.

5) Insurance, yes your bank will want the home insured.

6) Taxes, depending when you buy this number can vary considerably, as you are re-imbursing the seller for any taxes they have paid beyond the settlement date when you will be living in the house, and possibly a tax in full if you settle close to a tax date, as well as paying into an escrow fund so that it is funded to make future tax payments as they fall due.

7) Notary fee for closing

8) Government fees such as Recording of the deed and mortgage.

So as you can see it is a lot more than 3.5% and it varies depending where and when you actually buy and settle.

Of course, you may have been told about a seller assist, but the seller has to be able to afford to give an assist, and also be willing to give an assist. With an active market, if there are multiple offers, you cannot rely upon a seller assist to help you cover these additional costs.

This is one of the reasons we like to sit down with a buyer before we look at homes and go over all the costs involved. We also can give you an estimate of these costs for any property, but please realize, it is never JUST 3.5%.