Budgeting for Your Home: Understanding the Costs

Purchasing a home comes with several costs, some of which are rolled into your closing expenses, while others may be paid upfront. Below are the essential fees and costs associated with buying a home, with some negotiable items depending on market conditions.

Earnest Money

Earnest money is your formal promise to purchase the property. It demonstrates good faith to the seller and is typically around 1% of the purchase price, though this can be higher in competitive markets. The earnest money is due within 3 calendar days of the offer acceptance, so it's important to submit it promptly—preferably immediately, not waiting until day 3. The earnest money is credited back to you at closing, unless you default on the contract, and is typically submitted to the Title Company.

Appraisal

The lender requires an appraisal to determine the fair market value of the home. This is typically paid directly to the lender and varies based on property size. A rush appraisal may incur additional fees, especially if time is tight for closing.

Appraisal Fee: $750+

Title Fees

The Title Company ensures that the property title is clean and can be transferred to you without any legal issues. This fee is typically paid at closing.

Title Fee: $1500+

Survey

A property survey is used to confirm the exact boundaries and any encroachments on the land. This is typically paid at closing, and the price depends on the size of the property.

Survey Fee: $600+ (up to $1,000+ for larger lots)

Home Warranty

A home warranty covers major home systems and appliances (such as HVAC, plumbing, and electrical) for the first year of homeownership. This can help prevent unexpected repair costs.

Home Warranty: $700+ per year
This is often negotiable and could be covered by the seller. We recommend ordering it before closing for peace of mind.

Homeowners Insurance

Homeowners insurance is a critical part of protecting your investment. It covers damage from disasters like fire, flood, or theft. Your premiums will vary based on the insurer and the coverage you choose.

Homeowners Insurance: Pricing varies—check with your preferred insurance company for quotes.

Option Money

Option money is a non-refundable fee paid to the seller, securing your right to terminate the contract during the Option Period—typically a period of 7-10 days. This period allows you to perform inspections and negotiate repairs. The amount is negotiable, but it’s important to have this money delivered along with your earnest money before scheduling inspections.

Inspections

Home inspections are essential to gauge the property’s condition and assess the potential cost of repairs. There are various types of inspections, and fees vary depending on the property and the type of inspection. Some inspections are required by lenders, while others help you make an informed decision about your investment. Inspections should be done early within the Option Period, as it’s critical to leave time for negotiations before it expires.

• General Home Inspection: $500+
  A comprehensive inspection that includes the foundation, plumbing, electrical, and overall structure. This is highly recommended to ensure the home is in good condition.

• WDI (Wood Destroying Insects) Inspection: $100+
  Commonly required for FHA or VA loans. This inspection looks for termites or other wood-destroying insects.

• Pool Inspection: $150+
  If the home has a pool, it’s important to have it inspected for safety and maintenance issues.

• Septic Tank Inspection: $500-$900+
  For homes with a septic system, an inspection is crucial to avoid costly repairs.

• Mold Inspection: $300-$400+
  Mold can often be hidden within walls and ceilings. A mold inspection is recommended if you're concerned about this issue.

Lead-Based Paint Inspection: $300-$400+
For homes built before 1978, a lead-based paint inspection is often necessary.

Owner Association Documents

If the home is part of a Homeowners Association (HOA), you'll need to review the HOA documents to understand the fees, rules, and regulations associated with the community. These documents often include the resale certificate and other important information.

Owner Association Documents: Price varies, and the cost is negotiable.

Additional Costs

Some of these costs are negotiable or may be paid by the seller, depending on your negotiation skills and market conditions. It’s important to work closely with your Realtor® to ensure you’re aware of all potential costs, and that you’re able to negotiate any unnecessary expenses.

Key Takeaways:

• Earnest Money and Option Money: Paid early in the process, credited at closing (unless you default).

• Inspections: Essential for assessing the home’s condition; fees vary depending on the property and inspection type.

• Appraisal, Title, and Survey Fees: Paid directly to the respective companies and included in closing costs.

• Home Warranty & Homeowners Insurance: Highly recommended for long-term protection.

• Owner Association Fees: Applicable for homes within an HOA, negotiable with the seller.

Understanding these costs up front helps you plan and budget effectively. Work closely with your EC Real Estate Group Realtor® to ensure a smooth, successful transaction.