Deciding to buy a new home is obviously a big decision and we don’t want you to be caught off guard by some of the additional costs involved with purchasing a home. Here are some costs to keep in mind:
Earnest Money & Inspection
Typically the money you need upfront to purchase a home prior to finalizing your loan is for earnest money and an inspection. Earnest money is usually a minimum of $500 (can be negotiable) and inspection fees are generally $200-$500 depending on your area and what items you choose to have inspected. While you will not get the money back you pay for your inspection, any earnest money paid is usually applied towards your closing costs.
Down payments required vary depending on the type of loan you acquire. It can range from 0% down for a VA loan or a CHFA loan (in Colorado) to at least 20% of the cost of the home. To eliminate additional charges for mortgage insurance, you need at least 20% down. Of course, the more money you put down upfront, the more you decrease your ongoing monthly payment.
There can be a lot of confusion around closing costs. No matter what type of loan you are using, you will incur closing costs. Some types of closing costs are the same regardless of lender (prepaid costs for homeowner’s insurance, appraisal fees and property taxes), others will change based on lender. For example, some lenders charge additional fees and may pass along title closing fees. Keep in mind that closing costs are allowed to be paid for by the seller, so a good agent can negotiate these costs for you.