Upfront Home Buyer Costs


While it can bring plenty of joy and excitement, the home buying process also comes with some confusion. If you are preparing to purchase your first home, it’s important to know the following upfront costs so you won’t be blindsided by unexpected burdens and costs.

1. You’ll need money for a downpayment
Unless you qualify for a loan which allows for a zero downpayment, you will likely need to have between 3-4% of the homes value to use for your downpayment. If you have more available, that helps lower your monthly mortgage payment and avoid mortgage insurance.

2. An Earnest Money deposit will be needed
Earnest money is the money you pay soon after a Seller has accepted your offer, typically $1000-$4000 depending on the homes price. Your earnest money will be deposited into an escrow account. At close of Escrow, your earnest money will be applied toward downpayment or returned to you.

3. You’ll get a professional home inspection
While most states require a seller to disclose specific problems with a property, not all homeowners know about – or honestly reveal – existing issues. Your REALTOR will schedule a reputable home inspector for you during the buying process. It will generally cost you between $350 and $400.

4. You’ll need an appraisal on the home
Lenders require that the home appraise at the amount you plan to purchase it for to lend you the full amount. This is an upfront cost you will pay, and is usually about $450. If the property doesn’t appraise, your REALTOR will negotiate options with the Seller to try to help you get the home you want, or you can cancel the contract at no penalty to you.

5. You may have to pay closing costs
Closing costs are any expenses over and above the actual price of the home. They typically include things such as appraisal fees, loan origination fees, title searches, credit report charges and more. Your mortgage lender will provide a “good faith estimate” that gives you a general idea of what you will owe at closing. Your REALTOR may negotiate that the Seller provide a credit to cover your closing costs.

6. You will owe taxes
Make sure you know if your property taxes will be rolled into your monthly mortgage payment or if you will be responsible for paying them every year. Since recent tax laws have impacted the way homeowners deduct property taxes, it’s a good idea to consult an accountant to better understand how property taxes will influence the actual cost of your home.

Call Michelle today at 520.991.6234 to discuss any questions. We'll be happy to introduce you to our amazing lending partners who can discuss rates and options, including downpayment assistance and other helpful programs!