Overview
One of the first questions to come up when home shopping is How Much Money Will I Need to Buy My House? Followed quickly by When will I have to have each amount?
Earnest Money – At the time of an accepted contract
Earnest Money is the cash you put down up front when you make an offer in the Atlanta market. While there is no set amount, Earnest Money is generally about 1% of the Purchase Price on resale homes. The more Earnest Money, the more serious (and financially capable) you appear as a Buyer. Earnest Money is typically submitted to the Buyer’s real estate broker within 3 days of an accepted contract. If the closing is to take place faster than 3 weeks from acceptance, it is a good idea to submit the Earnest Money directly to the Closing Attorney.
Earnest Money is considered part of your downpayment and will be credited to you on the settlement statement at closing as having already been paid.
Due Diligence & Inspections – First week after contract acceptance
The amount and type of inspections performed during Due Diligence are your choice and may depend on expected issues in the home you are considering.
Here are the most common ones we see buyers perform:
- General Home Inspections typically run $500-$600 based on the size and price of the home.
- Radon Testing runs around $200 and takes 48 hours.
- Termite Inspections range from FREE to $75.
Optional / House Specific
- Property Surveys run $550 – $650 and can take up to 3 weeks for a 1/2 acre lot with a residential home on it. Larger tracts will be more and take longer.
- Stucco Exterior Inspections (especially with EIFS): Costs run $500 – $600 and typically need no rainfall prior to the inspection time for 24-48 hours.
- Air Quality
- Mold Dog
Credit Report and Appraisal – First week after contract acceptance
These amounts are usually combined and due to the Lender when making application for your loan – which you should do as soon as you go under contract.
Down Payment – At Closing
Down Payment amounts range from 3.5% for FHA financing to over 5-20% for Conventional and Jumbo loan products. This creates what we refer to as the LTV or Loan-to-Value which is a measure of risk for the lender. The more you put down, the less risk of default for the Lender. Sellers like to see offers with low LTV’s so those contracts will have the edge in a multiple offer situation.
Closing Costs – At Closing (Exception: Cost for )
Closing Costs are the costs it takes a Lender to create your new loan, insure your title, conduct the closing and service the loan after the closing. These fees typically range from 2.5% to 3.0% of the loan amount and could be factored into the interest rate if you would rather raise the rate to conserve cash now.
Escrows
The Lender is going to require you to have an Escrow Account if you are putting less than 20% down. These costs may be referred to as “Pre-Paid Items” and are intended to fund the account your Lender will use to pay the property taxes and homeowner’s hazard insurance policy. Property Tax amounts are determined by the local municipality and rates for your Homeowner’s (Hazard) Insurance policy are determined by the carrier you choose. However, the portion you will be charged in order to close is determined by your lender.
Options
One option to conserve cash as a Buyer is to include Seller-paid Closing Costs in your offer. With the rise in interest rates, buyers have also been using this option to buy down the interest rate on their loan. Most Sellers will concentrate on the net sale price anyway so they are not really paying the “closing costs”. Ultimately the loan amount is based on the full Purchase Price (meaning that if you are getting a 90% loan, you will be financing 90% of the closing costs if they are built into the price).