The Initial Costs
The gist of it…
The initial overhead of buying a house can include down payments, closing costs, assessment fees, and other miscellaneous fees that could occur. Better understanding these expenses will better prepare you to buy a house and to obtain a home mortgage loan.
Down Payments
A down payment is the initial payment made when something is bought on credit. In our situation it is the lump sum of money a homebuyer initially puts towards the purchase a home. While there are certain mortgage loans available that cover %100 of the cost of the home, (Such as: VA loans and USDA Loans), typically lenders expect some sort of a down payment towards the price of a home. However, if you are someone that has a steady income but not a lot of cash on hand, there are Grant Programs Available to help cover almost any of the out-of-pocket costs that come with buying a home including the down payment.
—Tip—
Put Money Down if you Can!
Any amount of extra money that you can put towards your house initially equals money saved in the long run. Putting money down lowers your monthly payment, saves you money on interest, and adds that much more initial equity to your home. A sizable down payment can lower the total amount of money you pay over the life of the loan by thousands of dollars.
Closing Costs
The day you close on your house is an exciting day. It is the day that you officially own your new home. That being said, it can also be an extremely expensive day and it is good to have an idea of what to expect. Generally closing costs fall into three different categories; lender fees, third-party fees and prepaid funds for taxes or mortgage interest. Simply put closing costs are the compilation of the fees for the services rendered to purchase a house. In other words, the people/companies that helped you along the way typically collect their fees on the day you close. According to industry statistics closing costs generally range from 2% to 5% of the purchase price. However, the amount of closing costs can vary greatly for depending on the legal requirements of the state, the location and condition of the house, and if 3rd party financial services needed by the homebuyer. Remember if you are having trouble coming up with the money for closing costs, or any of the initial costs of buying a home there are Home Buyer Grant Programs available by certain mortgage brokers.