How Much Does It Really Cost to Buy a Home?
This is what it actually costs to buy a home in today’s market.
As you’re getting ready to buy a home, you’re probably wondering how much it really costs. What cash do you need to have, where does your credit need to be, and when do you need it? Today I’ll break down a standard transaction into three parts: what you need to know up front, what you need to know during the transaction, and what you need to know at closing. Let’s use a purchase price of $400,000 for our example.
After the offer is accepted, you’ll need to deposit earnest money (typically 1% to 2% of the purchase price). In this case, that would be around $6,000. This isn’t actually an expense (it’s a credit at closing), but it will be held by the title company until closing.
Over the next few weeks, it’s time to do your due diligence and get some inspections and title work done. A general inspection will run you about $500—a sewer scope costs around $250, and a radon test is around $150. If there are structural issues, we can bring in additional contractors, but those three expenses happen on every property we put under contract.
Earnest money will be credited towards your purchase at closing.
Now let’s assume a down payment of 5%, which gives us $20,000. To be fair, there are tons of programs with low or no down payments, but for the purpose of this example, we’ll use a standard 10%.
To cover both prepaids and closing costs for the transaction, loan, and everything else, we estimate about 3% of the purchase price for them, or around $10,000. It won’t be exactly there, but it's a good, conserviative estimate.
The grand total for this home purchase adds up to $31,000, but the earnest money drops it to $25,000. Keep in mind that this is a broad estimate and every situation is different. If you have any questions about buying a home or anything else related to real estate, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.