Hidden Costs of Home Buying

When purchasing a home, most people focus on just the down payment that's needed for their mortgage program. However, there are several other fees to consider throughout the process. Let's take a look at these 'hidden costs,' when they are due, and how you can prepare for them.

Earnest Money:
Earnest money (EM) is a good-faith deposit given to the seller to demonstrate your commitment to purchasing the home. In NJ & PA, the seller will often expect the buyer to have an initial deposit of 1% of the sales price In some offers, the earnest money is split into two deposits. The first payment, usually around $1,000, is due within 24 hours of the contract being accepted. The second payment, is due about two weeks after or around the time of home inspections. Both earnest money payments contribute towards your down payment.

Appraisal:
The appraisal, typically around $450, is paid to the lender via credit card as soon as you go under contract.

Inspections:
General home inspections range from $600 to $900, paid on the day of the inspection. Supplemental inspections, such as sewer scope, pest/termite, radon, chimney, and moisture/basement inspections, may also be recommended based on the property type.

Closing Costs and Prepaids:
At closing, you'll need to cover closing costs and prepaids on top of the down payment. Closing costs typically range from 2% to 4% of the purchase price and include various fees such as title fees, transfer tax fees, and lender fees. Prepaids involve pre-paying homeowner's insurance and several months of HOA fees.

It's essential to consult with your lender for an estimate of closing costs and prepaids, ensuring you have a clear budget for these expenses. If you have any questions about the financial aspects of purchasing a property, feel free to reach out to us or your lender for guidance.

We always recommend our buyers have at least $5,000 saved and in liquid assets at the start of your home search. So you can have your earnest money and inspection money available immediately vs having to transfer or liquidate asset accounts.