What Additional Costs are Associated with Buying a Home?

Embarking on the journey of buying a home is an exciting and significant step. As a real estate agent, my initial consultations with clients delve into the comprehensive buying process, guiding them from the first meeting to the moment they unlock the doors of their dream home at the closing table. Amidst the myriad of details, a common question echoes from our clients: “How much should we budget for expenses between now and closing, excluding the down payment?”

In this blog, we'll unravel the financial aspects that buyers might encounter throughout this process. Let's explore the key items that you, as a buyer, could be responsible for on the path to homeownership. Buckle up for a thorough understanding of the financial journey ahead! 

FIRST: EARNEST MONEY

When it comes to drafting an offer, clients usually demonstrate their commitment by putting down earnest money—an act of good faith that declares, "we've got skin in the game!" While it's generally recommended to contribute around 1% of the purchase price, the exact amount is tailored to what the clients feel most comfortable with. This earnest money is securely held in an escrow account until closing, where it is then released to the attorney and allocated towards the closing costs and down payment.

SECOND: INSPECTIONS

Once the contract is ratified, there's a 10-business-day window for comprehensive inspections. Our recommended trio includes a full Home Inspection, HVAC Inspection, and CL-100 (termite) inspection, totaling an average cost between $470-$700. Additional inspections, such as pool, well, septic tank, sprinkler system, and chimney, are also viable based on client preferences. Inspectors typically request payment at the inspection, releasing reports promptly to both the agent and client. For those opting for FHA or VA financing, a clear CL-100 letter is mandatory, often credited by the seller at closing.

THIRD: SURVEY

Post-contract ratification, ordering a survey becomes crucial for those wanting clarity on property lines. While some clients check if the attorney can pull the most recent survey on file, those placing high importance on the matter are encouraged to order one within the 10-business-day due diligence period. Survey costs vary, ranging from $450 and upward, contingent on factors like lot size, location, and ease of locating metal stakes and landmarks.

FOURTH: CLOSING COSTS

Closing costs, essential for home purchase but distinct from the down payment, encompass expenses like deed stamps, attorney fees, and lender fees. Estimating an upfront dollar amount is challenging due to financing variables, but collaboration with the lender in the early stages often helps determine an approximate sum. Buyers can explore structuring their offer to request sellers to cover closing costs based on their preferences and negotiation strategy.

The various costs associated with purchasing a home, such as the down payment, inspections, and closing costs, should not be intimidating or dissuade you from taking the exciting step of becoming a homeowner. The key to navigating this financial landscape lies in collaborating with a reliable lender. A lender who engages in open conversations, understands your unique circumstances, and tailors solutions to your needs can make the financial journey smoother and more manageable.

Equally crucial is the partnership with a skilled REALTOR® who goes beyond merely facilitating transactions, but is your ally in structuring offers that align with your financial comfort and unique requirements. Together, a dependable lender and an experienced REALTOR® create the ideal synergy, guiding you through the complexities of real estate transactions and empowering you to find a home that not only meets your aspirations, but also aligns with your financial capacity. Don't let the intricacies of the process deter you—lean on the expertise and support of professionals to make your homeownership dreams a reality.