How Much Do I Need?
This is the biggest concern for most homebuyers. Many people today still believe you need a 20 percent down payment to buy a home even though that has not been true for over 30 years! There are many mortgages that allow you to put less than 20 percent down on your home. You can even put as little as 3 percent down if you have good credit and qualify. In addition to your down payment, you'll pay closing costs as well.
Here are the common costs that come along with buying a home, condo, or townhome and when you'll pay them during the homebuying process. The total amount of closing costs can vary from lender to lender and can range from $4000-$6000. We can sometimes negotiate to have the seller pay these costs as part of your contract. Your lender will provide you with a closing cost disclosure.
Application Fee: This is a fee you pay to your lender to start the mortgage process. It is typically paid once you find the property you want and you have a contract on it.
Appraisal Fee: This pays for the appraisal of the property that you are buying. You will pay this fee at the beginning of your loan application process. It is often covered by the application fee.
Credit Report Fee: Covers the cost of the credit report required by your lender. This is typically paid when you applied for your loan.
Loan Origination Fee: Covers the lender's loan-processing costs. The fee is typically one percent of the total mortgage.
Loan Discount: You can pay this one-time fee if you choose to pay points to lower your interest rate. Each point you purchase equals one percent of the total loan amount.
Private Mortgage Insurance (PMI): If you buy a home with a down payment lower than 20 percent, the lender usually requires that you pay for mortgage insurance. This protects the lender and is a monthly cost added to your payments. Once you have 20 percent equity in the home, you can apply to eliminate this insurance.
Prepaid Interest Fee: This covers the interest payment from the date you close on the home to the date of your first mortgage payment.
Escrow Account: This is used for your lender to pay your homeowner's insurance and property taxes if you choose to have them take care of the payments. Your lender will calculate how much money is necessary to start the account, and then each month when you make your payments money will be added to cover those bills when the are due.
Title Insurance: These generally include costs for the title search, title examination, title insurance, document preparation and other miscellaneous title fees.
Recording Fees and transfer taxes: These are typically fees imposed by governing bodies where the home you are buying is located. In our area, transfer taxes are paid by the seller in most cases. However, there are a few towns and cities that also charge the buyer. We'll inform you if you are buying in one of them.
We are happy to review costs with you, and help you determine if what you're being charged is in line with what we are seeing when you purchase your home.