By Ramsey Judah
Before a buyer goes to closing, there are some things that a buyer should budget for and prepare for in order for the process to go smoothly.
A deposit, also known as earnest money, is given by the buyer to the seller as consideration for the contract to show that the buyer is serious about the deal. The amount is negotiable but sellers typically ask for around 3% of the purchase price. I usually try to fight for 1% of the purchase price.
So if the purchase price is $500,000, then a buyer would need at least $5,000 to put down as the deposit.
The deposit is given by the buyer within the first 3 days after both parties sign off on the contract and then is returned to the buyer at closing. It usually goes towards the buyers closing costs.
The Home Inspection
If you get an awesome realtor like me, then I will tell you need to do a home inspection. A home inspection can usually run from $250 – $500 depending on the size of the home. The larger the home, the more time it will take the home inspector.
When a buyer applies for a mortgage, the bank must assess the property’s value. So after running the paperwork and ensuring that the buyer can qualify for the home, the loan officer orders an appraisal. The bank then hires a third party appraiser with no ties to the bank to go in and do an unbiased appraisal. A recent appraisal a client had cost $500.
The Closing Costs
Last, but definitely not the least, the closing costs. This encompasses the down payment, taxes, insurance, mortgage fees, title fees, and escrow fees. The escrow and title fees range depending on the escrow company and title company that are utilized.
These fees are not a surprise to the buyer. They are included in the buyer’s good faith estimate which is given to the buyer by the loan officer after the contract is signed and before the loan officer starts the loan process. The good faith estimate is a very close estimate as to what the costs will be and include the appraisal as well.