The Costs of Owning a Home

Some home buyers (especially first-time home buyers) think that a down payment is the only cost of buying a home.  However, they soon realize that their down payment is one of many costs that require cash or a check upfront.  So, how much should you expect to pay before closing on your new home? 

Depending on the type of mortgage you choose, you will probably make a down payment anywhere between zero and twenty percent of the purchase price of your home.  This range is very large, but the good news is that you get to choose what size down payment you’ll make in the very early stages of house hunting.  You can talk with your home loan officer to find out what mortgage type is best for you (and this decision will largely be based on how much money you can put towards a down payment).

Your down payment is usually the largest expense in buying a home, but remember that it is not the only cost.  There are several other expenses that can add up to be quite a bit of money.  Usually these costs total anywhere from three to eight percent of the purchase price of your home.     

When buying a home, you should expect to pay for certain items and services throughout the home buying process.  These expected costs are called buyer costs, or buyer expenses.  Some typical buyer costs include the inspection(s), appraisal, surveys, title insurance, escrow items, attorney fees, and mortgage fees (credit report fees, loan origination fees, points, interim interest, and transfer fees, to name a few).  Also, most home insurance companies require at least one month’s payment before the closing (and some companies want the entire year’s payment upfront). 

Some of the typical seller costs, or seller expenses, include the CL-100 (also called the termite inspection bond), deed stamps, the home warranty, commission for both the listing real estate agent and the agent representing the buyer, possible home repairs, and accrued interest.

Since no two real estate transactions are the same, you should get your buyer’s expenses confirmed before signing a contract.  It’s true that there are typical buyer costs and seller costs, but it’s a good idea to get these in writing so that you know how much you'll need to spend during the home buying process.  Also, be sure to talk with your real estate agent and your mortgage lender so that you can get an estimate of how much you should expect to pay when buying your new home.