What’s My Out of Pocket Expense?

As you move forward with your purchase, it’s important to understand your out of pocket expenses for the purchase of your home. On average, it’s best to set aside the following to be applied to the home purchase:

1. Earnest Money

Earnest money is funds needed to secure the property you are offering to purchase. This amount is contingent on how much the buyer wants to show as good faith to purchase the property, however, it typically ranges from $500 – $1,000 (please note that bank owned properties require a minimum of $1,000 in certified funds).

2. Home Inspection

The private home inspection allows the buyer the opportunity to have the home inspected to determine any defects with the home. This can range anywhere from $275 – $450 depending on the square footage of the home. Some home inspection companies include termite letters at no additional cost.

3. Appraisal

Appraisals are conducted to provide a value of the property you are purchasing. This varies by lender and ranges from $400-$600. This an also be considered an application fee.

4. Homewoner’s Insurance

Homeowner’s insurance is required by the lender to insure the property against any losses. This varies depending on the demographics of the home. If there’s a sufficient amount of closing costs paid by the Seller, the homeowner’s insurance can be deducted from the closing costs.

 

A good rule of thumb is to set aside approximately $2,000-$2,500 in addition to your down payment which can range from 3.5% for FHA and 10-20% for Conventional.