$1,020 Up Front Home Buying Expenses You Might Forget

Certified Mortgage Advisor
NMLS 1701021
Published 
September 11, 2020

$1,020 upfront expenses

Now, let's talk about $1,020 worth of upfront home-buying expenses that you might be forgetting. So the whole point of this is not to cause any panic. What I want to do is show you these numbers upfront. So they don't catch you off guard. Someone explained where these upfront costs are and then all the other costs that you might see during a home buying transaction.

For loaning a house

Now, this is going to be mainly focused on if you're using a loan to purchase a house. If you're using cash, these costs might be. Lower. So let's go ahead and dive into this.

Home Inspection

I would say 95% of home deals with financing are going to run into these two costs. The first one is your home inspection.

Home inspection is completely optional

You don't have to have a home inspection, but if you do, it's probably going to cost somewhere around $495. It's going to depend on your local market and you get to shop around for what you want in a home inspector. Now there's a general home inspection, and then you can also opt for more detailed things like a pest inspection or a chimney inspection, the mold inspection to get a better understanding of the condition of the home.

But home inspection is going to help you understand some things that you might need to be fixed in the home to make sure that there are no big issues that you're concerned about before. You go ahead and own that house. Now you can choose to do the inspection yourself. There is no requirement that says you have to have an inspector, do it for you. Most people do, though. For instance, I don't know what to look for in a home inspection, so I would need to hire an inspector. So that's probably going to cost around $495 here.

Appraisal

Then what you also have is the appraisal. Now the appraisal is included in your closing costs, but it's usually paid for it. So why is it paid for upfront? It's paid for upfront because if the deal falls apart because of the appraisal, the appraiser still wants to be paid.

Cost may vary

So the appraiser is the one who requires that upfront payment, appraisals change in cost, depending on where you're at geographically. Harder to reach locations is going to cost a little bit more money and easier to reach locations.

So more populated areas are going to cost less money because it's easier for an appraiser to get there. It's harder for an appraiser to go out in a rural area, but you're probably looking somewhere around $525 for that appraisal to be done. That's going to help the lenders see the value of your home so you can get that loan on the house.

All right now, some other upfront costs that you might run into sometimes. Also, we need to consider that Home Inspection, Appraisal, and Closing Costs are included in the $1,020. Also under that, we still have Application/ Credit Check, Earnest Money Deposit, Attorney, and Survey which are dependent on your situation.

Application or Credit Check

Let's talk through these really quickly. Number one, you might have an application or a credit check cost. Some lenders charges. For instance, we don't charge any upfront costs. When we do an application, some lenders might, it might be $31. It might be a hundred dollars. It really depends on the lender. So you might run into that.

Earnest Money Deposit

You also might have an earnest money deposit and an earnest money deposit is basically telling the seller, Hey, we're serious about writing an offer on your home. So we're willing to put some money into this contract. So basically you would say, Hey, we're going to put down X amount of dollars on the purchase contract, and that will go towards your total cash to close, but it just shows the seller that you're a little bit more serious. Most people do about 1% of the purchase price as the earnest money deposit.

Some people don't do earnest money at all, and that's really a better strategy if you don't have to do earnest money, but sometimes in a heavy seller's market, you might need to use earnest money.

Attorney

Also, you might have an attorney's cost. Attorney costs might run you a couple of hundred dollars here at not every state has an attorney. In some states, people use attorneys, and in some states, they don't. For example, the states I'm licensed in are Ohio, Tennessee, and Florida. Nobody uses an attorney. They have their realtor, walk them through the contract.

You can hire one or not

You're welcome to hire them if you need to. But if you don't have to, then you might be able to save some money there.

Survey

Also some properties require a survey and a survey is going to help the lender and the title company understand more about the property. If there are some things that are unclear about the boundaries of the property. Maybe it's been a long time since the home has been sold or there's any history about that land itself.

Survey's are paid upfront

There might need to be a survey and usually that's paid for upfront. It's usually around $150. So these are the things that you'll run into. Again, depending on your situation, they're not going to be applied to every single deal.

What people forget

This technically isn't like an upfront, this is like after-closing costs. You also have moving expenses. I think it's really easy to forget about you have your down payment, then closing costs, and then you also have these moving expenses and these can be everything from travel. How far are you traveling? Or you're going to pay for either gas or lodging and depending on how far you're moving. So you have a travel, you might be hiring movers.

You might have to do some home touch-ups and paint. Maybe you need to recall things. You need to fix some appliances. And then also re-keying. So the cost of changing out the locks on that home extra security. Then what you also have are your closing costs. Now, this is not part of those upfront costs, but closing costs are going to happen on every deal.

What's in your closing cost?

Your closing costs are going to include things like your lenders' fee for origination. It's going to include any title fees. So the title companies do a search of the property. Make sure you're the sole owner. When you close on that home, the county is going to charge some fees to record the deed in the mortgage. Then you also have taxes and homeowners insurance as well. Those all add together as your closing costs.

How much is closing cost?

Those can run anywhere from two to 5% of the purchase price as a good rule of thumb. Again, you can always have the seller pay. These, you can negotiate in your contract, have the seller pay a percentage of the purchase price towards closing costs.

#CalmMoment

So we covered a lot here. Let's have a CalmMoment, and realize that there are a lot of expenses in buying a house. You might be at the place where you're renting, and everyone's saying you're throwing the money away by renting. And you're looking at all of these videos and articles about buying a home. And you're seeing, I don't know, all these costs are adding up quite a bit and it starts to feel a little overwhelming and that's okay because buying a home can be expensive.

Be kind to your head, start to write

There's a lot of money that goes in upfront and it's not always easy to see the full picture of what's going on. What I would suggest is to go ahead and start writing down what these costs look like for you. Start to get an idea of what this can look like, because often what happens when we're jumping into something new.

When we don't write things down, it just stays in our head and things in our heads start to multiply and become more anxiety-inducing. Then when we actually write them down and start to see, okay, maybe this isn't as bad as we thought. So if you're in that place, go ahead and just start writing down these numbers of putting together these fees and what this might look like for you. These upfront costs, plus your down payment plus closing costs, plus any costs to move in.

Tailor your saving strategy

If you're at the point where you're saying, you know what, home buying is a little too expensive for me right now, that's perfectly fine. You can now tailor your saving strategy to say, Hey, maybe I want to spend some time focusing on paying down debt, or I want to spend some time focusing on increasing my savings, or I'm going to spend some more time and energy into my home fund for all these costs and down payment as well. So if you're there, that's perfectly fine.

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