How much does it cost to buy a home?

Often when speaking with potential buyers, I am asked how much will it cost to purchase a home.  Aside from the purchase price of the home there are a few expenses to remember. 

Down Payment

This is entirely up to the Buyer.  With FHA loans, a buyer can put as little as 3.5% down.  This payment is broken up between the initial deposit that is submitted with the Offer to Purchase, second deposit and the remaining amount which is due at closing.  Conventional loans usually want to see 20% down but different mortgage lenders will also allow 3.5% as well.



Inspections
After the Buyer has submitted and offer which is accepted the process begins. A home inspection is not required but it is strongly recommended.  A home inspector will inspect every facet of the home from the plumbing to the electric to the operation of windows.  They will let you know if there are any issues with the home and how serious they are.  A good home inspector will also provide Termite inspection and a Radon test too.  Inspections can range from a basic inspection $300 up to a complete inspection which includes termite and radon for $600.  Most inspectors will offer a discount if you order all three tests.

Closing Costs
Closing fees, also called settlement costs, cover almost every expense associated with your home loan. Because closing costs typically amount to between 3% and 5% of the sale price, it is best to wait until you receive the good-faith estimate before committing to a loan. Smart shoppers obtain good-faith estimates from two or more lenders, compare their costs and ask questions about any large discrepancies. Taxes are Title Insurance are the largest components of Closing Costs so I'll explain these in more detail.


Transfer Taxes
Closing costs also include Transfer Taxes:  In the City of Philadelphia there is a total of 4% due for taxes.  This is split between the Buyer and Seller, 2% from the Buyer and 2% from the Seller.


Title Insurance
These fees cover the administrative costs of a title search, title examination, issuance of the title commitment/binder and final title insurance policy(ies.) Also included would be charges for conducting the closing/settlement/escrow. You are free to select the company to conduct your closing/settlement/escrow, and to shop for the best pricing, however Title Insurance fees are regulated by the Federal Government so fees will be fairly similar between companies.  Costs will differ depending on which policy a buyer chooses, if the home was sold previously within the last 10 years a cheaper "re-issue" policy would be available.


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You can visit my website ThePhillyKind.com for market information, search available listings or contact a mortgage consultant.