How much does it really cost to buy a home?

** This post has been updated to reflect 2019 cost estimates ***

One of the first, and most important, jobs I have as a real estate broker is to educate my clients about the home buying and selling processes.  One of the biggest misconceptions, that I have encountered, is that buyers think that the only money they need to save to buy a home is the down payment.  Unfortunately, there are many other costs, payments and fees associated with buying a home.

Below are some of the most common:

Purchase Costs -these include your down payment, lender fees and transaction costs.

• Down Payment (3% – 20% (or more) of purchase price depending on the loan product that you choose.
• Loan Closing Costs (total cost can be from 2% – 5% of the purchase price) Your lender can give you a more accurate estimate of these costs. Below is a list of fees often associated with getting a mortgage.
  • Origination Charges- fees charged by a lender on entering into a loan agreement to cover the cost of process a loan. (may include origination , processing and underwriting fees)
  • Appraisal ($600 – $1000) required to determine the fair market value of the home. A property appraisal is generally required by a lender before loan approval.
  • Credit Report ($30 – $50) Lenders will obtain a copy to review your borrowing history and ultimately determine if they should risk lending you money.
  • Flood Determination/Life of Loan Coverage ($20 – $50) Determines whether or not your property is located in a federally designated flood zone. If the property is found to be located within a flood zone, you will need to buy flood insurance.
  • Courier Fee ($30+) covers the cost of transporting documents to complete the loan transaction as quickly as possible to avoid paying additional interest on your mortgage loan.
  • Title Insurance (Lender’s Policy) (Varies based on loan amount) Insurance policy that protects the lender from unrecorded liens on the property.
• Closing Fee ($350+) paid to the title company for conducting the closing on the purchase of the property. (commonly split 50/50 with seller)
• Miscellaneous fees you may also encounter: Tax Service Fee, Document Preparation Fee, Closing Protection Letter, Deed Recording Charge, HOA Fees (transfer fee, status letter, etc.)

Prepaid Charges – These are paid by the buyer at the time of closing. They are sometimes referred to as ‘fixed costs’.  

• 1 Year Hazard Insurance Premium (Homeowner’s Insurance)
• 3 Month Hazard Insurance Premium in Escrow
• 3 Month’s Property Taxes in Escrow
• Prepaid Mortgage Insurance (Depending on Loan)
• Prepaid HOA dues

Miscellaneous Additional Costs- these costs are typically ‘out-of-pocket’ and paid during the home buying transaction.

• Inspections $300 – $1000 depending on the inspections needed (Home, sewer, survey, radon, pest, etc.)
• Survey or Improvement Location Certificate – $300+
• Home Warranty $400+
• Moving Costs – truck rental, moving company costs, packing costs, etc.
• Legal fees