Buying a house is one of the priciest decisions that a person will make in their life. When making this decision people are always asking how much does it really cost to purchase this life-changing asset.
The Down Payment
In the process of buying a home, a down payment is the only cash expense most first-time homebuyers know. For instance, if you intend to buy a new home valued at $300,000, you’ll make a down payment of $30,000 at 10%.
The required down payment percentage of the property value varies from one lender to another. A new homebuyer looking to avoid paying private mortgage insurance (PMI) might spend 20% as a down payment.
Coming up with a 20% down payment for buying a new home is unimaginable, especially when you’re a first-time buyer. It’s due to this difficulty that most mortgage lenders offer percentages below or equal to 10%.
It’s a significant relief when an individual qualifies for an FHA loan. An FHA loan allows a new homebuyer to make a down payment of 5% of the property value. It becomes even better for someone qualifying for a VA Mortgage loan. With a VA Mortgage loan, you can pay 3.5% of the property value as a down payment.
Closing costs run between 2% and 3% of the amount of the loan, in general. Thus, if your credit is $270,000, the closing costs might be $5,400.
Mortgage stamps, real estate transfer tax, appraisals, attorney fees, and title insurance make closing costs vary in different states. Similarly, the closing cost can vary from one lender to another, mostly on the application fee.
Fortunately, when purchasing a new home, you can minimize closing costs. For example, always try to encourage the seller to meet closing costs. Moreover, try to negotiate for premium pricing for your loan from the lender.
Utility Charges or Adjustments
New homebuyers will need to reimburse the seller any expense incurred upfront. Such utilities might include heating fuel, water, or trash collection fee.
Typically, utility adjustments don’t run up to thousands of dollars.
These expenses are essential, despite not being easy to understand. Lenders play a critical role in handling these charges by using escrow accounts. A lender needs to save at least six months of real estate taxes, amounting to $1500 when charged at $250. Prepaid outlays can also be 2% of the loan amount.
The case is similar to insurance costs.
Cash Reserves as Required by the Lender
Most first-time homeowners are not aware of this expense. Lenders ensure after closing, a new homeowner must remain with some excess money.
A cash reserve helps pay for expenses like loan interest, taxes, and insurance.
A new homebuyer should, thus, expect to spend approximately $36,900. The approximation doesn’t include utility charges.
As a first-time or a regular new home-buyer, Grand Homes has the best home solution for you. Contact us for the best home deals.