There are several expenses related to purchasing a home. Buyers sometimes ask sellers for a credit to help cover their closing costs, but this is negotiable. Even with a credit from the sellers there are still cost to the buyer. It’s important to understand all the fees and costs involved in the purchase of a home and who is paying for what…here are some common buyer expenses.
Most home buyers are familiar with this expense. Typically, down-payment expenses run between 3.5% to 5% of the sales price, but there are options for 0% down-payment loans. It used to be common for buyers to put 20% down to purchase a home. Some loans require private mortgage insurance paid monthly if the down payment is less than 20%. The best way to find out what you will need for your down payment is to talk to a good mortgage lender.
Earnest money are the funds you will need to deposit in escrow when your offer is accepted. Earnest money is basically proof that the buyer “earnestly” wants to buy the home. In the Redding area, earnest money deposits start around $1000 and go up to 1% of the purchase price depending on the price range of the home. The earnest money will be credited toward the buyer’s closing costs/down-payment at the close of escrow.
This is the second largest out-of-pocket expense for a home buyer. I am happy to send you a detail breakdown of these expenses, just let me know and I’ll email them to you. These fees are to cover the costs of your mortgage and your share of the title and escrow fees. It’s not uncommon to ask the seller for a credit toward your closings costs. However, if you do this you need to remember that asking the seller to cover your closing costs is, in essence, offering them less for the property. The sellers have their own closing costs, such as the Realtor fees and their half of the title and escrow fees, to cover out of their proceeds.
This can be a significant expense depending on the amount of stuff you have and the distance that you need to move. I recommended that you contact several moving companies to get estimates that you can compare. Of course, you can do your own moving, but you will still likely have the expense of boxes and a truck rental.
The home inspection is technically an optional fee, but I always recommend that buyers have this important inspection. In California, real estate contracts have an inspection period for the homebuyer to have whatever inspections they deem necessary. The home inspector will do a thorough inspection of the home to find any problems that may need to be addressed before moving forward with the home purchase. In the Redding Area, this fee is usually between $275-$350, depending on the size of the home. There are also specific inspectors who specialize in the various systems of the home. These systems include, but aren’t limited to, Heating & Air Conditioning, Septic Tank/Sewer Lines, Well, Foundation, & Roof.
Wood Destroying Pest Inspection
Commonly known as a pest or termite inspection. This inspector looks for signs of termite and wood destroying insect infestation and damage. The inspector also checks for any signs of dry-rot in the wood outside and inside the home. This inspection is not for rodents or nuisance insects such as spiders. In the Redding Area, this fee is usually around $125.
The appraisal is required by the lender and most of the time must be paid for prior to the appraisal being done. This fee can vary greatly depending on the price range of the home, the difficulty in finding comparable properties, and how quickly the appraisal needs to be done. Your lender can give you the exact amount for your appraisal but you can plan on at least $450.
There are many expenses involved in purchasing a home. Even if you are using 100% financing you will still need some money to complete the purchase of a home. It’s best to plan ahead and not be caught short.