How much money do I need to buy a house in the area? The answer to this question varies….
Are you purchasing a $300,000 house or are you purchasing a $30,000 house? And it depends on if you’re paying cash for the property or if you’re getting a down payment. I am going to make the assumption that you’re probably going to need a loan on the property and you’re wondering how much all of that costs. So let’s jump on into the topic at hand and I will go over it in detail so you understand it completely.
Upfront Costs for a Home Purchase
The upfront cost of buying a house really isn’t that extreme. We’ll just say for example purposes we are purchasing a $100,000 house. So the first few fees that you’re going to face in that home buying process is AFTER you get an actual accepted offer on a property.
There’s no upfront charges by myself, the realtor, and you never actually have to pay me throughout the transaction so I am totally free for you to use.
Earnest money is the first upfront cost after getting an accepted offer. On a $100,000 house that’s going to range from $500 to $1000. (A Good Rule of Thumb is 1% of Purchase Price) Earnest money is a good faith deposit that you’re going to actually purchase the house and that is what your intention is. Earnest money is due within five days after acceptance and like I said, it’s between $500 to $1000. It also goes towards your down payment on the house & you will receive a credit for that on a closing statement.
The next thing after earnest money is inspections. For a $100,000 house, it will probably cost between $300 to $350 for a home inspection. Home inspection pricing depends upon the overall square footage & age of the house.
If you want an additional radon inspection on top of that, it’s another $100. If you purchase a rural house you will need both a well & septic test. This expense can be placed on the seller but for purposes of this article those cost about $450 total.
Note: Inspections of any sort are optional & not required by most mortgage lenders.
However, I always recommend getting at least a home inspection so you know what you’re buying. After the home inspection, there is no other fees involved with purchasing the property besides on the lender side of things.
What Are Lenders Fees or Costs
Each mortgage lender will differ in the fees they charge to each client. Most local banks or credit unions have great rates but not as many loan programs. Going to a local mortgage broker can result in you getting both the best rate & terms because they shop the note around.
Lender Fees Summed Up: Your lender is going to have an appraisal that needs to be done. Their fee for generating your loan. You have taxes, insurance, title fees & misc expenses. What this is referred to is “closing costs”.
So how much does all that cost? Well let’s just say that closing costs range from about 1 to 2% of the loan price. And it depends upon how much is actually going into the escrow account.
IMPORTANT NOTE: You can ask the seller to pay for most or all of your closing costs in an offer to purchase. Ask your agent about this!
Down Payment Options
The last expense you will have is a down payment. With the various different loan types the down payments also differ across the board. Some loan types you need 5% down. Some you need 10% down. Some you don’t need anything down. For example, a veteran loan, a VA loan, you can buy it for 0% down. You can purchase a house without putting any of your own money down, which is extremely nice. And it’s a big thank you to all those who have served the United States in their military or armed forces.
Then there’s other first time home buyer loans that are 3% or even 0% here in Wisconsin that are extremely beneficial for you, the first time home buyer. Your parent or relatives might still think you need 20% down to buy a house but that is NOT true. It is actually very rare nowadays for a first time home buyer to put 20% down on their first loan.
Summed Up – How Much Cash Do I need?
When it’s all said and done I always say, it’s better to be safe than sorry. I am speaking for myself when I say this, but I would want at least $5,000 to $10,000 of disposable income when you’re getting ready to purchase a house. (You can Still Buy With Less)
Are you going to use all that? Definitely not. But if you wanted to do some updates right after purchasing, it’s always nice to have a pile of cash sitting on the side just for that oops budget. In case anything were to go wrong after purchase. Then you’d have funds to cover those expenses upfront and your lender is going to require you to have some sort of cash reserves in case anything were to happen.
Anything I can Do to Help?
So I hope that answered your question on how much money you need to purchase your first home! I hope this was beneficial and if you want me to break it down in more detail, in more depth, feel free to reach out to me. Fill out the form down below or give me a call or text on my cell phone which is 920-252-2864.
