Over the next 12 weeks, this blog will focus on on the many parts of purchasing a home. We know that purchasing a home—whether it be your first or your fifteenth—can be stressful and confusing.
But it doesn’t have to be! We help people buy homes all the time! This series explores and explains the typical roadmap to purchasing a home. Some steps are more cumbersome than others, but if you know what to expect you won’t be taken off guard if (and when!) complications arise!
For the third part of this series, we'll be covering the costs associated with buying a home.
Four main costs are associated with purchasing a home: earnest money, home inspection, appraisal, and closing costs. First, let’s talk about earnest money.
Basically, earnest money is a set amount of money you put down up front to show the seller that you’re serious about purchasing the home. Earnest money is due typically within the first 3-5 days after you go under contract with your new home. Most of the time, the amount of earnest money paid is 1-2% of the purchase price. Earnest money goes toward closing cost and/or purchase price at closing.
Home inspections, useful for determining major issues in a home before purchase, are a great tool for buyers and sellers to determine if the home is priced appropriately. The cost of a home inspection can range from $350-$700, but could be more because the cost of a home inspection depends on the square footage of the home. The Bell Team has partnered with several home inspectors, and over the years we have found the most reputable and hardest working companies out there. We’d be happy to share our vendor list if you’re in the market for a home inspection, or any other professional work to be done on your home.
Home inspections are paid for at the time of service. Testing for radon or anything else out of the ordinary is not required, but you should visit www.epa.gov/radon to see if radon testing is best for you and your family.
Appraisal is another important part of purchasing a home. Since no one wants to over-pay, it’s important to hire a reputable, neutral appraiser. The appraiser’s job is to determine a fair price when considering all aspects of the home. Appraisal saves the buyer from over-paying and the seller from selling too low. Your lender will also check the appraisal to make sure that you’re not purchasing a home that you cannot afford.
Appraisal costs usually range from $300-$500 and are paid at the time of service or beforehand with your lender.
Finally, the buyer pays closing costs, which range between 3-4% of your loan value. Closing costs include a range of fees associated with the transfer of a property. They include attorney fees, HOA transfer fees, recording fees, survey fees, and more. For a full list of possible closing costs, check out this page.
The total amount of closing costs will change for every transaction, but we’d be happy to sit down with you to determine your expected cost of closing. Keep in mind that a great negotiator can move some of the costs off your plate and onto the seller’s (such as appraisal and other fees).
Next time, we’ll discuss the process of putting an offer on a home. In the mean time, give us a call if you’re ready to start your home purchase journey!
The Better Buyer Series
- Searching for a Home
- Costs Associated with Buying a Home
- Putting an Offer on a Home
- Binding Contracts
- Due Diligence
- Finance Contingency Period
- Things to Remember