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EnnNrst MoNrv This is the iniual deposit that the homebuyer puts down on the home when submimng an oer. The purpose is to convince the seller that the buyer "earnestly" intends to purchase the home. The earnest money is refundable if the buyer is not saused with the property upon receipt of the inspecuon, the bank is unwilling to lend on the property or the buyer is unable to qualify for nancing. If the purchase goes through, the earnest money will be applied to the down payment and closing costs.
DowN PnvmrNt Many homebuyers rely on a mortgage from a nancial insutuuon for their home purchase. Lenders feel more secure if you have money invested in the house, therefore requiring you to contribute some poruon of your own funds in the form of a down payment. Down payment amounts will vary from 3.5% to 20% of the loan. For example, a 5% down payment on a $300,000 home will be $15,000.
CtosNc Costs In addiuon to the down payment, prepare to pay a number of addiuonal upfront costs incurred in buying a home. Collecuvely called "closing costs", these expenses range from 2% to 4% of the mortgage.
SrtttNcIN Costs Its important to consider what it will cost to move in to a new home. If the home you need needs immediate repairs or major appliances, it is smart to allocate that upfront. A common mistake that homebuyers make is spending all of their money gemng into their home. Be aware of your comfort level when it comes to cushion nances. UP-FRONT COSTS