Costs To Consider When Buying a Home
Posted 01-17-2016 at 08:21 PM by OHdanIO
Hi all! Dan Mitchen here with Keller Williams Greater Cleveland Southwest. Are you a first time home buyer and wondering what you should expect to pay when purchasing a home? Here are some costs to consider when you're ready to start looking!
Down payment- This is going to depend on how much you purchased your home for and what percentage you're putting down. FHA loan may require as little as 3.5% down, conventional will vary, OHFA loans as little as .5% down, and USDA (rural areas) loans as little as 0% down.
Earnest money- Earnest money is considered good faith money put into escrow to show the seller you're serious with your offer. In other words, you're putting some "skin" into the offer. Whatever amount you decide on will go towards your down payment at closing. Earnest money is NOT required in Ohio, although I've never seen an offer not have any earnest money. Since it's not required by Ohio law, it can be any amount you'd like. The larger the amount, the more appealing it may look to the seller. With a purchase of $100,000 or less, you can expect the earnest money to be around $500-$1,000. For a purchase price of $100,000-$200,000 you can expect around $1,000-$2,000. Some agents will recommend 1% of the purchase price as the earnest money amount, but again it's completely up to you!
Home inspection- A home inspection can run anywhere from $250-$500 depending on the sq footage of the home. One inspector in particular that a lot of my clients use charges the following: $300 for 1,500-2,000 sq ft; $350 for 2,001-2,500 sq ft; and $400 for 2,501-3,000 sq ft. Sometimes I'll have buyers request that the seller pay for their home inspection. After I say what I'm about to say here, they see it from a different perspective and change their mind. This is more than likely the biggest investment of your life. Do YOU want to be the inspectors client or do you want the SELLER to be the inspectors client? If you have the seller pay for your home inspection, the inspector is working for the seller. How much confidence do you have that they're going to work as hard as they can to find every possible thing wrong with the house?
Appraisal fee- An appraisal fee can cost anywhere from $300-$550, although $400-$450 is more towards the norm. What's an appraisal you ask? An appraisal is a third party service who goes out to the property you have an accepted offer on, and they conduct an analysis on how much the property is worth. They'll check what other homes in your neighborhood recently sold for and will make other miscellaneous adjustments. Note that your lender in almost ALL cases will only lend up to what the house appraises for. So if you have an offer accepted at $100,000, the house needs to appraise for $100,000 or more.
Closing costs- You don't always need to pay closing costs. If you don't have the funds to pay your own (or if you simply just don't want to), you can always ask the seller to contribute towards your closing costs. The closing cost amount will all depend on the lender and title company you choose. Most people initially want to get a mortgage from their own personal bank which is fine, but I HIGHLY recommend asking what their closing costs are and then asking that same exact question to other lenders before making your decision. Ask them what the cost is for their origination fee, underwriting fee, appraisal fee, application fee, credit report fee, flood certificate, tax service, and any other bank fees they have. Some lenders will only charge 1 flat fee and will have no hidden costs. As for the title company, the fees will vary depending on where the house is located and the purchase price. For title fees, expect to pay around $1,250 plus an additional $4/per thousand. Again this is just a general idea.
Home Warranty- If I'm representing a buyer, I will ALWAYS recommend a home warranty. A basic home warranty will cost somewhere around $400. We can always ask for the seller to pay for your home warranty, which they very well may! If they say they won't pay for it but you still want one, we can also try adding the home warranty into the purchase price and have the seller still "pay" for it, and that way they'll receive the same net.
If you're thinking about buying or selling a home in the surrounding Cleveland or Akron areas, I'd be happy to help you achieve your Real Estate goals! I can be reached at (330)322-8868.
Down payment- This is going to depend on how much you purchased your home for and what percentage you're putting down. FHA loan may require as little as 3.5% down, conventional will vary, OHFA loans as little as .5% down, and USDA (rural areas) loans as little as 0% down.
Earnest money- Earnest money is considered good faith money put into escrow to show the seller you're serious with your offer. In other words, you're putting some "skin" into the offer. Whatever amount you decide on will go towards your down payment at closing. Earnest money is NOT required in Ohio, although I've never seen an offer not have any earnest money. Since it's not required by Ohio law, it can be any amount you'd like. The larger the amount, the more appealing it may look to the seller. With a purchase of $100,000 or less, you can expect the earnest money to be around $500-$1,000. For a purchase price of $100,000-$200,000 you can expect around $1,000-$2,000. Some agents will recommend 1% of the purchase price as the earnest money amount, but again it's completely up to you!
Home inspection- A home inspection can run anywhere from $250-$500 depending on the sq footage of the home. One inspector in particular that a lot of my clients use charges the following: $300 for 1,500-2,000 sq ft; $350 for 2,001-2,500 sq ft; and $400 for 2,501-3,000 sq ft. Sometimes I'll have buyers request that the seller pay for their home inspection. After I say what I'm about to say here, they see it from a different perspective and change their mind. This is more than likely the biggest investment of your life. Do YOU want to be the inspectors client or do you want the SELLER to be the inspectors client? If you have the seller pay for your home inspection, the inspector is working for the seller. How much confidence do you have that they're going to work as hard as they can to find every possible thing wrong with the house?
Appraisal fee- An appraisal fee can cost anywhere from $300-$550, although $400-$450 is more towards the norm. What's an appraisal you ask? An appraisal is a third party service who goes out to the property you have an accepted offer on, and they conduct an analysis on how much the property is worth. They'll check what other homes in your neighborhood recently sold for and will make other miscellaneous adjustments. Note that your lender in almost ALL cases will only lend up to what the house appraises for. So if you have an offer accepted at $100,000, the house needs to appraise for $100,000 or more.
Closing costs- You don't always need to pay closing costs. If you don't have the funds to pay your own (or if you simply just don't want to), you can always ask the seller to contribute towards your closing costs. The closing cost amount will all depend on the lender and title company you choose. Most people initially want to get a mortgage from their own personal bank which is fine, but I HIGHLY recommend asking what their closing costs are and then asking that same exact question to other lenders before making your decision. Ask them what the cost is for their origination fee, underwriting fee, appraisal fee, application fee, credit report fee, flood certificate, tax service, and any other bank fees they have. Some lenders will only charge 1 flat fee and will have no hidden costs. As for the title company, the fees will vary depending on where the house is located and the purchase price. For title fees, expect to pay around $1,250 plus an additional $4/per thousand. Again this is just a general idea.
Home Warranty- If I'm representing a buyer, I will ALWAYS recommend a home warranty. A basic home warranty will cost somewhere around $400. We can always ask for the seller to pay for your home warranty, which they very well may! If they say they won't pay for it but you still want one, we can also try adding the home warranty into the purchase price and have the seller still "pay" for it, and that way they'll receive the same net.
If you're thinking about buying or selling a home in the surrounding Cleveland or Akron areas, I'd be happy to help you achieve your Real Estate goals! I can be reached at (330)322-8868.
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