What does it cost to buy a home?
It's one of the most common questions we get in real estate: What does it cost to buy a home? This week on The Landis Look, Justin is back at the whiteboard to break down the money you'll need, both when you make an offer and at closing.
First up: Earnest Money.
Earnest money is a good faith deposit you make when you go under contract to assure the seller that you’re serious about buying their home. It’s typically about 1% of the purchase price, and one of three things happens with this money:
If you buy the house, it becomes part of your down payment.
If you don’t buy the house, but it’s before your contract’s contingencies are up, you can get your earnest money back.
If you change your mind after your contingencies are over, the seller keeps your earnest money.
Then you’ll need to be prepared for some costs during due diligence.
Due diligence is when you’re trying to learn everything you can about the house to make sure it’s one you really want to buy. You’ll definitely want to order an inspection, and there may be other things you’ll also want to order depending on the property like a survey, radon test, air quality testing, and more. You’ll typically only need about $400 to $500, but it’s smart to budget at least $1000 so you’re prepared for any test the home may need.
The rest of your costs are due on closing day.
Closings costs include things like attorney fees, state taxes, or title searches. You’ll also have some prepaid costs, which include home warranties, a prepaid portion of your mortgage payment, and more. Those costs can vary widely, but most people can expect to pay in the 2-3%, and we can often negotiate those into the cost of the home so that you don’t need so much cash on closing day.
And of course, you’ll need your downpayment.
There are programs out there to help you buy with little to no money down that could be worth exploring, but most people should expect to put 3-20% down.