Buying A Home
sarah_ann81
member
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Hidden costs at closing question
Okay-quick background?our current rent is outrageous so we have decided to buy and will save $100-150 a month by buying. Super stoked, but we have no clue what hidden costs we will encounter during closing other than down payment and inspector fee. We are pretty strapped for money, and our broker is not very good and we are trying to get money together. HELP!!!!
Re: Hidden costs at closing question
if you're pretty strapped for money, you have no business buying a house. Even if your mortgage payment would be cheaper, your taxes, insurance and utilities would certainly make up for it.
Have you considered the possibility of renting a house?
This is incorrect and, rather, your closing costs will depend on a great number of things including, but not limited to, what fees are attached to the closing (not all are always attached), what inspections are required, what fees were prepaid, whether pr not prepaid insurance is included and the list goes on an on. I've closed on 4 home - each time, my closing costs were between 2-4K. Talk to your lender about a GFE and don't be afraid to ask questions and get them to work for you.
In my experience, CC have been around 3-5% of the property sale price. This will include prepaid money into escrow for taxes/insurance, origination charges, appraisal fee, credit report fee, tax services, flood certification, title insurance (owner and lender), as well as HOA dues (if applicable).
The inspection is something you opt to do and is paid separately from closing to the inspector (unless you are getting an FHA loan and have an FHA inspection in addition to your own). Inspections are generally $300 give or take.
Other hidden costs you're likely not considering when buying are: taxes/insurance. For a $200,000 house in my area, taxes are around $5K per year, and insurance is around $700/year. These are generally divided up monthly and paid in addition to your mortgage to your bank (called escrow).
While living in our current home, we've probably spent an additional $15k+ since buying a year ago. This includes appliances (home was a foreclosure), blinds/window treatments, paint, light fixtures, insurance deductible for wind/hail damage requiring a new roof, as well as needing to re-tile the master bathroom due to black mold.
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Find a cheaper apartment.
Owning a home is MUCH, MUCH more than the monthly mortgage.
Before buying have your 20% downpayment, closing costs (think 5% of home price), moving expenses, repair/renovation dollars set aside, decorating (furniture/appliances/paint/curtains & rods/etc) , yard items & tools, utility deposits --- to start with.
Your realtor can help you estimate closing costs (prepaid house insurance for 1st year, title insurance, recording fees etc) on top of your inspection. Your realtor may not be as helpful as you 'd like if they feel you are not financially prepared to actually buy at this time.
Before buying look at your budget and determine what you can afford (do NOT go by what a lender tells you what is affordable. Keep housing expenses to no more than 25-28% of your TAKEHOME pay (mortgage+PMI if you do not put down 20%, taxes, insurance and utilitie - which may be much higher than your rental utilities and then HOA if applicable.) This amount can be a bit higher in a HCOL area 30-35%.
After all of that you still NEED an emergency fund (preferably 6 month's expenses)
Buying a home can be exciting, but be financially prepared first or this experience can quicly turn into a nightmare.
Pay off credit card debt and save, save save.
Two books that have alot of helpful information:
Homebuying for Dummies and Mortgages for Dummies.
Agreed! Your closing costs will completely depend on the sales price.
Your lender should be able to give you a Good Faith Estimate or some type of sheet that should list out expenses. Such as whether the appraisal will need to be paid up front and things like that.
While this may be true for some deals, it is not true for others. Our closing costs (prior to paying 0.75 points) were $11k. Remember, closing costs depend largely on property taxes and home owner's insurance rates, both of which vary greatly based on location.
OP- If you are scraping together money, then you are not ready to buy a house. What happens if you close on the house and 3 days later your water heater gives up the ghost, flooding your basement in the process? You need to have a significant stash of cash on hand for emergencies sitting in your bank account, just chilling and waiting, at all times.
And to answer your original question, at the closing table you will need your down payment amount (minus your earnest money deposit), and your closing costs (minus your inspection and appraisal fees, which you will have already paid earlier in the process). You'll also need to allocate money for moving costs, utility start-up fees, and all of the random stuff you will be purchasing in the next few months (everything from new toilet cleaning brushes to caulk to heavy duty outdoor trashcans to lawn equipment to picture frames). Seriously, once you buy a home you will begin hemmoraging money and it will never end. That $150 you are "saving" will be spent in a single trip to Home Depot, and you'll be back there again every weekend. Our hardware store knows us by name and says "you again!" every time we walk through the doors. It's kinda ridiculous.
In Home Buying for Dummies, the authors instruct you to assume the CCs will be 10%, which INCLUDES commissions to all the REAs involved.
In most markets, the sellers pay the REAs' commissions (buying and selling agent).
But ditto Sisugal and others, it doesn't sound like now is the right time to buy a home.
Find a home to rent or rent a less expensive apartment.
And if you aren't happy with someone on your home buying team, dump them. Seriously if you have a butthead working for you, you will get butthead's results or lack of results.
There are a lot of fees when it comes to closing and they can vary. We had a closing credit of 8K and still spent another 6K when everything was said and done. It you are strapped for cash, I would reconsider going this route. Tight on cash is not the way to go into buying a home. Even after you close and get the keys where will be a lot of additional costs that you could not imagine. That 100-150 a month you saved from renting will not compare to owning a home and having all of the responsibilities.