I have just recently gotten into the housing market and am looking to buy a home for the first time.
To simplify things, let’s assume the home I am planning on buying costs an even $100,000. I think you can get away with 3% down now. So right there is $3,000.
Now where are all the other hidden costs? Will those scale according to the cost of the house? Are there things in your state that must be paid but not necessarily in other states?
Thanks for your time.
Oh, my. Lessee… title fee, filing fee, appraisal fee, document fee, notary fee, credit search, title insurance, mortgage insurance, homeowner insurance (can’t get the mortgage until you’ve arranged this), interim interest, etc. You can expect to pay up to $5000 in closing costs in some places, in others as little as $1000, but I don’t know what market you live in, so I can’t get specific.
If you’re willing to pay higher interest, the closing costs might be reduced or eliminated, but only a few of them scale with the price of the house–more with the price of the market.
Add to this the points you might pay to reduce your interest rate, and you start to get the idea.
I purchased a condo when my wife and I got married 6 years ago. I qualified at that point for a first time buyer program and for a low income program through the state. I was allowed to put down only 2 1/4 percent on a $60K condo. With closing costs and other charges, though, the total amount of cash I needed was about $3500. Other costs include lawyer’s fees, insurance, taxes, and document filing fees for the deed etc. All these fees will probably vary at least a little bit based on where you live.
There are also things called discount points and origination points that lenders “offer”. The more points you pay, the lower the rate you get and the more more money you pay up front. One point is basically one percent of the amount you’re borrowing. this money goes straight into the lender’s pocket and are worhtless in my book. There are plenty of loans available that have zero points, get one of those.
It would be preferable to put down 20%, if possible, because then you avoid private mortgage insurance (PMI), which can add a substantial amount to your payment. PMI does go down as you make payments, but is just another expense. Of course, in would really be preferable to buy a house with cash. In the real world, you’ll have to deal with PMI for a few years at least.
Damn hamsters ate my first post, but in summation…
(based on my experience in Georgia)
Closing cost
attorney fees
document fees
filing fees
appraisal fees
title search fees
inspection costs
Make sure you ask the lender for ALL of the cost involved, and then add a good 15% to that amount.
Hmmm. How much would that scale. Let’s just assume everything is average in averageland, USA.
Would this make Daddytimestwo’s out of pocket expense = roughly a little under 3 times his down payment? I am using rough numbers here, but 2-3ish percent of 60K is near 1500 dollars. He had to pay 3500 dollars which is just over 2 times the amount of his downpayment. Does that sound about right?
I won’t be able to afford to put 20% down in this area anytime soon but can do between 3 and 5 percent depending on the housing cost (simply as the downpayment). I am not sure how much extra cash I will need to finish off the rest of it assuming I do actually buy a place here in the near future.
Personally, I recommend that you find a good mortgage broker and ask him/her all your questions. My fiancee and I recently sold our two places and bought one. The mortgage broker was very knowledgable and willing to talk at length about whatever we wanted to know. Such a person can explain to you the pros and cons of the various options, more up-front points with lower interest rate vs. lower up-front costs with higher interest; fixed vs. adjustable; “teaser” rates, etc. Which options are “better” depends on your specific situation, how much money you have or can afford, how long you intend to stay in the house, etc. etc.
I personally think this is exactly why you should go to a realtor and discuss it with them.
They will work with a mortgage broker to figure out based on how much money you have to put down, how much house you will be able to afford and roughly how much your monthly mortgage payment will be. There are ALWAYS surprises involved so leave at least a thousand dollars aside (in my opinion) from what you tell the realtor you want to put down. Inevitably, at the last minute, you will get the “Oh, I forgot to tell you about the county assessor inspector justifier rectifier ombudsman certification fee…” That was one of the things that amazed me the most about the home buying process…all the assholes who would show up at the house with you, charge you $300, spend 5 minutes or less looking at the property, then sign a form and leave. How the hell do I get that job?
Nothing…
Really.
There are plenty of zero down loan programs. This isnt always for the best, but if you wanna buy a house and dont have any cash, any port in a storm.
I did it, got an ok interest rate at the time too. I just flat out didnt have anything to put down and I decided I was sick of renting. We worked it out where the offer we made included the seller paying our closing cost and insurance, so we walked out with the keys to the house, and no real cash out of pocket. It would have been better if we had a few grand laying around, but thats the way it goes.
Yeah, maybe I should do an IMHO thread and ask, how much did you pay for your house and how much cash you need upfront? I know I can get better answers from a broker here, but I want to get a general idea of what I am up against before going into it full tilt.
When my fiance and I closed on our house we actually got $800 back. I think we paid out about that much in appraisals and what our realtor called good faith money, during the buying process. We qualified for a zero down payment loan and recieved a 3% gift from the seller (which meant that we paid 3% more for the house than we had originally negotiated). We got a decent interest rate I think, if 6.75 is decent. It was 6 mos. ago.
Go and talk to a realtor. Go and talk to the bank also. We were told by our realtor (whom I would trust with my firstborn in a tornado) to see what we qualified for before we even started looking at houses.
We got money back too. My wife, being a teacher, qualified for a 0% down mortgage. The sellers had were buying another house, so they were ‘motivated’ – we offered to pay their asking price if they covered all closing costs. We had to pony up $1000 in earnest money, but we got about $700 of that back at the end of the day.
We do have to pay PMI for a while, but it was worth not waiting until we had 20% – we locked in a 6.25% interest rate and saved a few years of rent.
It really depends. Where I’m from there is (Alberta, Canada) you have to put a min 5% down. You also have all the associated costs (lawyers fees, land title search, registrations, etc). Depending on the price of the house, expect to need a couple grand on top of your down payment for the extra costs.
Obviously after reading this thread, the 5% down is in no way universal.
Most financial institutions and mortgage brokers that have websites also have calculators online that can give you that answer.
1 word of advice - Do not spend as much money as you can qualify for. You really, really risk spreading yourself thin if times get tough.
Yeah, shop around a lot. I talked with five differant mortage companys, including a couple on the internet. I would up switching companys at the last minute…
The house i bought had had the two car garage turned intoa family room 20 years ago or so, and the company I was going to go with wanted copies of the building permits. The owners of course didnt have that, and werent even sure that they were required at the time. I called the city, and they said they didnt know if they were required either, but in any case it was long enough ago that they didnt care, and they didnt have records of permits that far back (kind of a small town/suburb).
Since the company I was going through was wanting to balk because of the permit, I called around and all the other mortgage companies said “Why would they want a permit, we’ll lend you the money”. I got a better offer and went with it.
We bought our first house 3 years ago, and wondered the same thing. I think that the closing costs were around $5K and included all the fees listed above (lawyer, title, property taxes, etc).
We were ready for those costs, but it’s the next costs that really got us. Since it is our first house, all the equipment necessary for the daily maintenance needed to be purchased. While most of the costs were incidental, they sure added up! Think lawnmower, gardening supplies, paint, fixtures, minor repairs (and the tools necessary to complete the job), winter maintenance equipment…
Keep a bunch of money around so you can keep surprises under control. All you need is one big problem to get you into big trouble if you don’t have the money available (furnace, fridge, roof, act of God…).
Also ask about “Professionals Loans”. The bank where I got my first mortgage had “0% down/NO PMI” for certain classes of professionals, such as physicians. They are not often advertised, but they do exist.
"Most financial institutions and mortgage brokers that have websites also have calculators online that can give you that answer. "
I have searched for one but the only thing I could come up with was a mortgage calculator on many different sites.
“1 word of advice - Do not spend as much money as you can qualify for. You really, really risk spreading yourself thin if times get tough.”
I can totally agree with you there. I am looking for something that is 3 times less than the banks currently say I can afford. I don’t know how they get off thinking that I could afford what they were asking but that is another story altogether.
Oh how timely. Mr. Snicks and I just bought the new house and moved in Sept. 12th. It’s great, thanks.
Definitely see a realtor/broker. If you have very good credit, you might be able to get an 80/20 loan (which is the option we were able to take). What happens is this: broker fronts you the 20% from his company for the down payment, then gets you a home equity loan from a bank (so that you can pay him back). You then borrow the remainder as a regular mortgage. Since it appears you have 20% equity, you avoid PMI. We also got the seller to pay closing costs, so aside from going six figures into debt for the house (which itself is scary), we only paid $1000 earnest money + $300 for the inspection. All told, $1300 out of pocket.
That’s been excellent for us, because after-buy costs might break you. After all, you’ll need the rake/lawnmower/new trash cans/food/whatever. It’s nice to have that cushion.
The whole deal seems a bit shady the way it goes down, but it’s legit and our mortgage broker was excellent. And we got a great rate.
Our realtor also told us that if you’re serious about buying, do so. Don’t try to wait to save up the money, because housing costs will probably outpace what you can save, meaning that you won’t be able to buy the same house in a few years that you’re looking at now. So go ahead and get advice from the professionals - there’s lots of ways to help you into a house.
Snicks
I used to be a realtor, and the general rule of thumb was 8%. you can negotiate everything, of course, and, maybe even get a good deal, but if you go by the “customary sharing of costs” it’s 8%. also, either a realtor or a closing company will give you info more readily. BUT, a good mortgage co. can find you bond money etc…to help pay some of the costs. the down payment gets you on the board, as it were, in the mortgage game. then there are the legal costs (cf. previous posts). they can vary, but the title insurance will cost you at least 750-1500 clams. then, there is 1 yrs of insurance that they put into escrow (600 on up). so, you can see how the costs on a nothing down loan can add up.