Even if you are buying a home via a mortgage, you will have to put up some cash from your own pockets. Here are some of the expenses you will need to pay for:
The down payment is the expense that most people know about, and it's represented as the percentage of the price of the house. The typical down payment is 20% of the value of the house, but it can be lower than this depending on who is financing the home purchase. For example, the Federal Housing Association (FHA) provides home loans with down payments as low as 3.5%. However, low down payments are exceptions, not the norm, and you should prepare yourself for a 20% requirement since it's what most lenders want.
Buying a home involves multiple parties such as the seller, lender, appraise, insurer, realtor, and property inspector, among others, and these parties must be paid for their services. Closing costs are the lender and third-party fees that you must pay when buying a home. Closing costs include things like appraisal fees, survey fees, document preparation fees, and wire transfer fees, among others.
The amount of closing fees depends on the professionals helping you with the purchase and their respective charges. In some places, you may negotiate with the seller to help you bear the burden of the closing fees.
When someone puts up their home for sale on the market, they don't stop consuming or paying for utilities just because they are selling the property. After all, a home seller can't predict exactly when they will sell the house. This means they will still be producing trash and paying for their disposal, making orders for gas fuel, and paying their sewer charges. In some cases, you may close the purchase deal when the homeowner has paid for some of these costs in advance. It only makes sense that you will be required to reimburse the seller for these expenses.
As you know, buying a home on mortgage comes with some regular monthly expense. For example, you will have to pay for home insurance, pay your mortgage, and pay property tax, among other things. Most lenders require you to put up a down payment for these future expenses; it's their way of confirming that you will be able to make the payments. The money is put in an escrow and released to the relevant parties when their due date arrives. There are a few exceptional situations where you may not be required to prepay your expenses. Examples include if you put up a sizable down payment for the purchase or if the seller handles them on your behalf.
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20 March 2018
After I decided to buy a new home, I realized that I probably needed to prioritize the things on my wish list. Since I am not wealthy, I realized that I probably couldn't get everything that I wanted out of a single home--at least, not this time around. Fortunately, I worked with an incredible real estate agent who helped me to figure out which type of property would pay off in the end. Finding a home took a lot of time, but I am really pleased that I found the right one. This blog is all about learning to prioritize your home hunting wish list so that you can have the home and financial situation of your dreams.