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How much money does it take to buy a home?
Posted On: May 25, 2017
This Blog was written by our agent, Mark Corner. You can contact Mark at 406-579-6636 or firstname.lastname@example.org
The biggest cash due at closing, is generally your loan down payment. A Conventional loan has a 5% down payment, an FHA (Federal Housing Authority) loan has a 3.5 % down payment, if you are a Veteran a VA loan can have a 0% down payment, for properties outside of the city limits of Bozeman an RD (Rural Development) loan also has a 0% down payment and for mobile homes on rented lots and other Fannie Mae/Freddie Mac non-conforming homes a Portfolio loan can have a 20% to 30% down payment.
Most loans have Origination Fees due at closing in addition to the down payment. This is the fee that the bank charges to make the loan. It can be 1% to 1.5% of the loan amount.
Most loans require an appraisal of the property you are buying to make sure there is enough value in the home to support the loan amount. Appraisals can vary depending on your loan type but are commonly $600 to $800. This can usually be put on a credit card and charged at closing.
Your lender will want to see a couple of months of cash reserves on hand. This is usually the monthly amount of your loan payment, property taxes, HOA fees, home owner’s insurance and mortgage insurance if required by that loan type times 2 or 3 months.
Then there can be a host of small fees depending on your loan type and the property you are buying. There can be an interest rate lock fee, wire transfer fee of your funds, document prep fee, discount points, credit report fee and recording fees.
Lenders are required to provide you with a Good Faith Estimate at the time you apply for your loan that will itemize all of the fees associated with your loan. They can be penalized if their Good Faith Estimate is off by more than 10% so they are fairly accurate with these Estimates.
It is always recommended that you hire a licensed home inspector to inspect the property you are buying. This is usually done a few weeks after you have an accepted offer. Home inspection costs are around $350 to $400 with an additional $150 is you want a Radon test completed. Most home inspectors like to be paid when the inspection is completed and generally accept credit cards.
The fee that the title company charges to process the transaction and record the deed is generally split 50/50 with the seller. This fee is commonly $250 to $350 and half of this amount will be added to your closing statement as part of your cash due at closing. The title company will also pro-rate your property taxes, HOA fees, street and tree maintenance fees and address any SID/RID fees due at closing. Most loans will require you to pre-pay at closing into your loan escrow account 1 year worth of property taxes, home owner’s insurance, mortgage insurance and HOA fees.
With many loan types, several of these small fees can be built into the total cost of your loan. Loan closing costs, pre-paids and fees can be built into the price of your home and paid by the seller at closing. This is why two of your real estate team members should be a residential loan officer from a bank or a mortgage broker to get you in a loan with the best possible rates and a real estate agent to negotiate the best possible terms for you with the seller.
In addition to your loan fees and closing costs, plan for moving expenses (U-haul rental), cleaning fees where you are moving from, utility connection fees or deposits for your new home, rekey the locks of your new home and additional deep cleaning costs of your new home (Sellers are only required to leave the home in Broom Clean condition unless you negotiate additional terms in your Buy/Sell Agreement). In a few rare cases, there can also be fees for a survey, foundation inspection, one time rural utility hookup fees, one time HOA application fees and water rights transfer fees.
WANT TO LEARN MORE ABOUT THIS?! Sign up for our First Time Homebuyers Class THIS TUESDAY (May 30th) at 6:00 pm at our office (2621 W Main Street, Bozeman). Space is limited so please RSVP by May 29th at 6:00pm to guarantee your spot. (Email email@example.com or call/ text your confirmation to our realtor, Angie Keele, at 406-599-2578.
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