Budgeting for Upfront Costs: The Homebuyer’s Guide

While many homebuyers typically budget for their monthly mortgage payment—and include things like Private Mortgage Insurance (PMI) and escrow payments in their planning—there are upfront costs that must also be considered when determining a home buying budget.

Upfront costs are the one-time expenses you’ll pay after you make an offer on a home and the offer is accepted. Below is a list of the key expenses you should be prepared to cover. The exact amounts you’ll pay will vary.

What is the difference between closing costs and cash to close?

Closing costs are all the service fees required to close on your loan. Cash to close, on the other hand, is the total amount – including closing costs – that you’ll need to bring to your closing.

Down Payment (3-20% of the purchase price)

A down payment is typically 5 to 20% of the purchase price of your home – but qualified borrowers can put down as little as 3% with options.

VA is 100% financing

Earnest Money Deposit (1-2% of the purchase price)

Earnest money is a sum of money you submit with your offer to show the seller that you are serious about purchasing the home. It’s also known as a “good faith deposit.” During closing, the amount you pay in earnest money can be applied toward your down payment or closing costs.

Home Inspection ($300-$600)

When buying a home, you’re responsible for paying for the inspection of the home. An inspection will tell you about the home and any potential maintenance issues you should be aware of. I have several well-qualified home inspectors that I work closely with. .

Closing Costs (2-5% of the purchase price)

Closing costs are what you will pay to the people representing your purchase, including your lender, real estate agent and other third parties involved in the transaction. Also known as settlement fees, closing costs typically include the following:

  • Government recording costs
  • Appraisal fees
  • Credit report fees
  • Lender origination fees
  • Title services
  • Escrow service fees
  • Notary 
  • Transaction Fees

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