When buying a home it’s important to be prepared financially. This means that you need to consider and be aware of all costs, not just your mortgage.
There are 3 categories of costs when purchasing a home: upfront costs, closing costs, and down payment. The amount you bring to the closing table (your cash to close) includes all of your closing costs and down payment. See below for a breakdown of each of the 3 categories:
1. Upfront Costs
Once your offer on a home has been accepted, these are the costs you pay out of pocket for things such as a home inspection and appraisal. You will also need to put an earnest money deposit when your offer is accepted.
2. Closing Costs
Once your offer on a home has been accepted, these are the costs you pay out of pocket for things such as a home inspection and appraisal. You will also need to put an earnest money deposit when your offer is accepted.
3. Down Payment
The down payment is paid at closing. Down payment percentages can vary based off of the loan program and can be as low as 3%.
Cost Breakdown
Upfront Costs:
- Appraisal: $600 – $800 (depending on property type)
- Earnest Money: generally 3% of the purchase price
- Home Inspection: $500-$700
Closing Costs:
- Closing Costs: generally 2%-2.5% of the purchase price and include:
+ Government fees: recording deed, state recordation tax, state & local
transfer tax (if applicable)
+ Loan fees: Prepaid interest, lender fees (processing, underwriting, funding)
+ Title & Escrow fees: title insurance policies, deed preparation, settlement charges, wire transfers
+ Prorated property taxes
+ Prepaid Homeowners Insurance