Buying a home comes with unforeseen costs.
It’s wise to be prepared for everything you might run into on the home-buying journey.
So we put a list together of up-front costs to help prepare you!
Upfront costs when buying a new home:
- Down payment
- It’s the obvious one. You’ll need to put a down payment. The minimum down payment varies by mortgage program. Conventional loans start at 3 percent down. And FHA loans require at least 3.5 percent down. As always, you are free to contribute more than the minimum down-payment.
- Closing costs
- Your closing costs can be anywhere from 3-6% of your loan amount. That means if you take out a mortgage worth $200k, you can expect the costs to be somewhere between $6k-$12k.
- Reserves
- In some cases when you take out a mortgage, the lender may require you to have a certain amount of assets apart from your down payment and closing costs – called Mortgage Reserves. These are assets that you have after your down payment and closing costs are paid for. These assets prove you are able to continue covering your monthly payments for a period of time.
- Appraisal Gap
- An appraisal gap is the difference between the fair market value (determined by an appraiser) and the amount you agreed to pay for your new house. This means that you may need to negotiate with the seller OR pay the difference out-of-pocket.
- Initial Property Taxes
- Your taxes will depend on where you live, but often buyers will be asked to pre-pay 2x months’ worth of county and city property taxes at closing.
At United Faith Mortgage, we’re passionate about educating people on all parts of the homebuying process. If you have a question about any of the initial fees or “surprise costs” to watch out for, we’d love to help.
One of our core values is NEVER PRESSURING. It’d be our pleasure to share everything we know and give the best advice we can, with a guaranteed zero pressure.