Despite the often long and complicated process, buying a new home is almost always an exciting adventure. But there’s that small matter of money that usually dampens the excitement. Many home buyers, especially first-time buyers, just don’t realize the true cost of buying a house and how much money they’ll need – but that’s something they need to know. So read on to discover exactly how much money you’ll need to buy a house in Floresville.
Standard Costs of Buying a House
To understand how much you’ll need to buy a house, there are standard costs both with the loan and the closing. The down payment is the one part that the buyer has to have. Whereas that can be gifted to a buyer, it cannot be borrowed or contributed by the sellers. Some of the other items can be contributed by the sellers. Your agent and lender can help you in that area. But if you have to pay everything you need to be prepared and here’s a breakdown of the typical costs…
Down Payment
“Simply put, a down payment is the cash a home buyer pays upfront in a real estate transaction. It’s a percentage of the home’s purchase price, and though mortgage lenders once required a 20% down payment, this is no longer the case. In fact, the average down payment is actually much less. Today, you can get a mortgage for as little as 3.5% down. But although a 20% down payment may not be required, if you can afford it it does make your monthly payment lower by eliminating the loan PMI. Making a larger down payment may mean securing a lower interest rate and avoiding paying for private mortgage insurance (PMI).”
To discover more about down payment options and assistance programs, you can consult a Floresville agent. Just call (210) 216-7722 to speak to an experienced agent.
Earnest Money Deposit
EM is earnest money which many consider a deposit as it is money that is put into escrow and will be used as a reduction in money required at closing. Its function is similar to a deposit but its primary purpose is to assure the seller that you are in fact a serious buyer. Basically, when you put down your earnest money, you then have skin in the game. Earnest money is assurance to a seller that if for some reason the buyer defaults on the contract a seller will be compensated for the time their property is off market. And possibly items that the buyer requested be done.
The earnest money deposit is usually “1% to 2% of the home’s purchase price. Though these deposits aren’t required to have a contract, they’re customary and sellers and agents both expect them, particularly in a competitive market.” A seller would not be inclined to take an offer without earnest money for several reasons. One is that earnest money will go to the seller if a buyer defaults on a contract. Without EM there is no potential of payment for the time the home is off market. A seller could have lost another buyer if the buyer walks away from the contract.
Earnest money is governed by the contract. The defaulting party per contract loses the earnest money be it the buyer or the seller. The title company holds the EM in escrow as a disinterested third party and is governed by the contract to apply the EM properly for that transaction. With a successful closing the EM is applied as a down payment.
Closing Costs
A significant expense you’ll encounter when you buy a house in Floresville or anywhere else are the costs you’ll incur at closing. Closing costs come in at around 2% to 6% of the home’s purchase price. It may be possible for your agent to negotiate for the seller to pay a portion of your closing costs. FHA loans have a limit that a seller can contribute to the buyers’ costs but that amount is high.
Closing costs typically include (but are certainly not limited to). . .
- Appraisal fee
- Title fees – escrow costs
- Mortgage origination fee
- Mortgage application fee
- Escrowing a certain portion of property taxes and homeowners insurance See paragraph below
- Flood insurance if applicable
- Tax certs
- Flood certs
- Deed filing costs
- Attorney costs for items like writing the deed
Prepaid Costs
In addition, “you sometimes must prepay certain expenses such as property taxes, homeowners insurance or mortgage interest. Your mortgage lender will likely have you make an initial escrow deposit that they’ll put into an account for you. Your lender will then use the escrow account to pay any property taxes, interest, or insurance premiums when they come due.”
Mortgage Payments
And of course, the main expense if financing the home. There are the monthly mortgage payments, the main components of which are the “payment towards your principal balance (the total amount borrowed for the home loan) and towards interest.” Some of each payment will also be for taxes and insurance.
If you put less than 20% down, you may also have to pay for private mortgage insurance (PMI) in your mortgage payments. “The cost of mortgage insurance depends on your loan type, down payment amount, credit score, and many other factors, but it can add $100 a month or more to your mortgage payment.” PMI is calculated on the loan balance. It is to “insure” the loan.
What is PMI and how to avoid it
Additional Costs to Consider
Besides the standard costs delineated above, you will likely have other costs you should factor in when determining how much you’ll need to buy a house in Floresville. These include (but again are not limited to) . . .
Moving Costs
Even moving to a new neighborhood in the same city can get pretty pricey. “The average cost of a local move is around $2,300, while a long-distance move (over 100 miles) averages around $4,300.” Moving Cost Calculator
HOA Fees
If the new home is in a community with a homeowners association (HOA), you will probably have to pay monthly or quarterly HOA fees. These costs your agent can give you and the lender uses them to calculate your monthly payment.
Home Maintenance/Repairs
All homes require regular maintenance, and most homes need at least some repairs. Experts say the cost of maintenance and repairs typically amounts to about 1% to 3% of the purchase price annually (depending, of course, on age and condition). One does not really have a good figure for this as there is always unexpected items with home ownership. But depend on the fact that there will be and budget for it whether it is a HVAC repair, painting, or maybe even doing some upgrades if you can afford to right away. Even with a good inspection there can always be unexpected items that need repair.
Example Breakdown of Costs
To better understand exactly how much you’ll need to buy a house, take a look at this example breakdown of the home-buying costs.
Suppose the purchase price of the home is $350,000. Here’s what you’ll be looking at . . .
- 20% down payment – $70,000
- Closing costs – p $7,000 to $17,500
- Moving costs (under 100 miles) – an average of $1,638
- Total – $78,638 to $89,138
But if you’re willing to pay PMI by making a significantly smaller down payment of, say, $17,500, you could decrease the cost by $52,500. There are loans that require as little as 3.5% down and other down payment requirements. In Wilson county there are different loan programs that are zero down loans. Lenders and your agents can discuss those with you.
How Much Money Do You Need: Buying Your Home Nuts and Bolts Details
Get the Help You Need to Buy a House in Floresville
And that last point shows why it’s so critical that you work closely with an experienced Floresville agent. A good local agent can help you find ways to decrease the cost when you buy a house. So if you plan to buy a house in Floresville and are concerned about the money aspect, be sure to contact us today at (210) 216-7722.