OUT OF POCKET EXPENSES WHEN BUYING YOUR FIRST HOME
I often get asked as we are helping people in Idaho Falls and Pocatello buy houses “What are the out of pocket expenses in buying a home?” Well, the answer gets a little tricky without knowing exactly which loan you go with but I will outline normal expenses that are incurred and the order you pay them when purchasing a home. If there are any terms used in this explanation that you are unfamiliar with feel free to ask or check out my blog on Terms Used When Buying a Home.
The first thing that happens is you find a home and submit an offer. Once you are “Under Contract” (this is simply a term used to say that a seller and a buyer have agreed to a price and terms on the purchase of a home and are working to complete the transaction) you have to pay earnest money to the responsible broker or to the title company (depending on the way the contract is written). Typically earnest money is set by the listing agent and runs around .5 – 1% of the home purchase price. This money is your way of showing that you are serious about buying the home. Earnest money is only lost if you back out for a reason other then the contracted safety nets built into the paperwork. The earnest money goes toward your down payment at closing.
THIS IS IMPORTANT!
Second is to have the home inspected. The importance of an inspection is very high and I recommend you bring in an expert to do so instead of a family member that does not know about building, plumbing, structure repair, electrical and many other facets of a home. Homes can look great from the outside and still have lingering issues. The inspection is paid for by the buyer and is completed in the first stage of the contract (usually the first 5-10 days, ask your agent when you write your contract to know exactly). Inspections generally run between $200-$450 depending on the size of your home. If you decide to have a specialist come out i.e. HVAC tech, chimney sweep or surveyor those are also expenses picked up by the buyer at time of the inspection.
The third thing you do is order the appraisal immediately and depending on the lender and your loan program you pay either out of pocket immediately or you pay at closing. It also is customary in Idaho at lower purchase points for the seller to contribute to the buyers closing costs. It is not the case every time and every home sale is unique but it is quite common. Appraisals are generally $350-$475 the price is controlled by your lender and they are the best one to ask about it.
Buying a home is a big step and is an amazing thing but it is a necessary move to stop wasting money on rent in most cases. With interest rates being so low it is normally WAY less to buy than it is to rent. Please reach out to me to ask any questions or comments!