Down Payment

A down payment percentage can be determined by talking with your lender. It can be as low as 3% depending on credit scores and the lender. However, keep in mind that private mortgage insurance (PMI) is required until you reach 20% equity on home. Many people will put 20% down on a home to avoide PMI as it raises your monthly payment.

The median home price has fluctuated just above 300,000 dollars in recent history.

3% of 300,000 = 9,000

20% of 300,00 = 60,000

As you can see, the down payment amount can be significantly different. Figuring out what is affordable for you is the most important step in determining what you purchase.

Home Inspection

Highly recommended, a home inspection is usually between 300-500 dollars depending on the size of the home and the inspection company.

Appraisal

If you have a loan, you must have an appraisal. The appraisal is ordered through the lender you are using. For specific costs, check with the lender during the pre-qualifying process. Expect to pay several hundred dollars.

Closing Costs

Closing costs are usually the thing that first time home buyers are the least aware of when approaching the home buying process. Closing costs are generally around 3% of the price of the property but can be as high as 5%.

3% of 300,000 = 9,000

5% of 300,000= 15,000

Closing costs can be but do not have to be completely paid by the buyer. Sometimes not at all. In a seller’s market, it is common for the buyer to pay all the closing costs. In a buyer’s market, sellers will make concessions and may cover part of or all the closing costs.

Many things factor into negotiating for closing costs including: time the property has been on the market, how motivated the seller is to sell, the purchase price being offered by the buyer. Closing costs are negotiated at the beginning of the purchase process in the initial offer and subsequent counter-offers. Unless there is due cause, asking for closing costs after the fact is not advised and will more than likely cause a deal to fall through or at the very least create ill-will with the seller that could impact later negotiations.

A common practice to secure closing costs is to pay above the list price of the property and while simultaneously asking for closing costs. This allows the buyer to “build in” the closing costs to the loan. Beware though, if the house appraises below what you are offering, the deal will need to be renegotiated and closing costs are usually one of the first things to go.

Category: Buying