From start to finish, here is a list of out of pocket costs for buying a home:
(with real life examples from my past transactions.)
1. EM - Earnest Money. Usually about 1% of the purchase price; in this market even more. It is submitted in the form of a check or wire by the buyer of a home, no later than 48 hours of mutual acceptance of an offer. Or, if your agent is submitting it for you, no later than 72 hours after mutual acceptance.
Example: First time home buyers of mine who bid on a $405,000 house submitted $6,000 earnest money, and even that seemed low. I was told later by the listing agent that other offers included $10,000. The appropriate amount depends on the market, competition, and your ability to put those funds down. It is merely one part of your offer, and you want each part to be as strong as possible, but do keep in mind that this factor alone probably won't make or break a deal.
2. Inspection - A home inspection typically runs betwen $400 and $600 plus tax, depending on the size of the home, how far the inspector has to drive, and how old the home is.
Example: My go-to inspector usually charges $450, unless the home is older than 1950, in which he adds an additional $50 because there is usually more structural wear and tear or damage to inspect. He also includes a pest-inspection in his pricing, which might be an additional cost for some inspectors. Always check out 2 or 3 inspectors who have good recommendations before choosing one.
3. Sewer Inspection - If the home you are buying is connected to the city sewer line, it is best to have a sewer scope done. This alone usually costs about $250 plus tax, and sometimes more if the professional has to drive far to the home.
Although some home inspection companies offer to do this type of an inspection for you too, or have their preferred sewer scope guys come out, this is usually done by a separate company, so a separate appointment is needed. All of my clients have had to pay $250 plus tax.
4. Potential Repairs - If items were discovered in the home inspection that need to be addressed, and the seller does not take care of them, be prepared to pay for them yourself; or don't...and move on to the next home. There is no set amount I can prepare you for here because it depends on the home. Just keep this in mind as a potential additional cost.
Things happen. Even if you have had an inspector through your home and he found no major repair items, keep in mind that part of owning a house means being ready for an appliance or water heater to go out. This is why it is good to have some money set aside for the "what ifs" and the "oops I didn't see that"s.
5. Appraisal - If you are using a VA loan to purchase a single family home, be prepared to pay a $800 appraisal fee. With a conventional loan, this fee is wrapped into the closing costs that can paid for at closing, or wrapped into the mortgage.
The very first active military soldier I helped to buy a house paid $800 out of pocket for his appraisal right before it was ordered. I have seen this wrapped into closing costs to be financed with the loan as well. This will depend on your lender so make sure to ask.
6. Closing Costs - Once you have made it through the inspection and appraisal, it is time for the biggest chunk of change...the closing costs! Closing costs can really vary. You may have heard that closing costs usually come out to about 3% of the purchase price of the home. (By the way, closing costs are not necessarily always considered "out of pocket" because many of the closing costs line items can be financed.)
The earnest money is applied towards the closing costs. the closing costs are comprised of the down-payment, escrow fees, title fees, excise tax, and courier fees, for example.
Example: Here are the actual closing costs for first time home buyers I have worked with. These are real numbers to give you a realistic idea.
Purchase price: $450,000. Earnest Money: $6,000.
Property Taxes*: $ 185.57
HOA Dues: $ 14.14
Lender Premium: $ 608.00
Lender Premium Tax: $ 60.80
Deed Recording: $ 107.50
Mortgage Recording Fee: $ 130.50
Recording Fee: $ 10.00
Settlement Agent Fee: $ 925.00
Settlement Agent Fee Tax: $ 92.50
Messenger Fee: $ 50.00
Wire Fee: $ 4.00
Sales Tax - 3rd Party Fee: $ 5.40
Homeowner's Insurance Reserves for 3 months**: $ 194.70
County Tax Reserves for 5 months: $1,763.90
Prepaid Interest: $ 403.84
Underwriting Fee: $ 695.00
Processing Fee: $ 600.00
Administration Fee: $ 250.00
Appraisal: $ 700.00
Appraisal Admin Fee: $ 100.00
Appraisal Rush Fee: $ 200.00
Flood Certification: $ 10.25
Tax Transcript Service: $ 12.75
Homeowner's Insurance: $ 778.82
Buyer's Advanced HOA Assessments: $172.00
New HOA Accoutn Set Up Fee: $ 75.00
*Property Taxes are prorated and it will depend on how much your taxes are, but also when your home closes.
** Will depend on when you close.
That's quite a list, isn't it?? Buyers usually don't see the full list with estimates until weeks into the process once closing approaches. I hope this helped a little bit, so that you can understand what closing costs are comprised of, and what realistic numbers look like.
If you have any questions, please ask me. You can email, text, or call me. :)