There are good reasons that homebuyers are counselled to see a lender early in the homebuying process. Yes, he or she will let you know if you qualify for a mortgage and, if you do, you’ll be given a preapproval letter to submit with an offer to purchase.
But, you’ll also find out how much you can borrow and how much you can afford to spend every month on your house payments.
That lender will expect to be paid for lending you money and will be paid, at closing. And, that’s just the beginning of the additional costs to buying a home that many homebuyers aren’t aware of. Let’s take a look at some of these so you aren’t caught unaware as you take on the process.
The initial outlay
We’ve found that many of our home buying clients assume that the down payment on the loan is required upfront.
In reality, the lender won’t ask for it until later in the process, but some lenders will want to see “seasoned funds,” meaning money that has been in an account for some time, typically 60 days or longer.
Then, when you find a home that you want to purchase, the seller will expect the purchase agreement to be accompanied by what is known as a “deposit.”
While there is no set amount required for a deposit, we tell our clients to expect to submit a check for 5% of the purchase price. This money is held in escrow and will be deducted from the sale price at closing.
According to a study conducted by Porch.com, 88% of homebuyers have the home inspected.
This is another upfront cost (payable at the time of service) and the nationwide average price of a home inspection is $336, in Vancouver you are going to spend between $500 – $700, depending on the size and the type of home (Condo vs House etc).
If the home inspection report shows problems with the home, you may want to hire a specific specialist to investigate and quote a price to fix it. This, too will need to be paid for at the time of the service.
What you’ll need at closing
As mentioned earlier, prior to closing, the lender will expect you to pay your down payment and that amount depends on the price of the home and the type of loan you’ve acquired. Conventional lenders typically require 25 percent of the loan amount.
Shortly after applying for a mortgage, your lender will supply you with a Loan Estimate, which will give you a general idea of what you’ll pay in closing costs.
These numbers, by the way, are estimates. The Closing Disclosure that you’ll receive shortly before closing is the final statement of the terms of your loan and how much you’ll need to pay in closing costs.
In general, closing costs typically equal between 2 percent and 5 percent of the loan amount.
We are happy to answer any questions you may have about the closing process.
But, that’s not all
Welcome to the world of homeownership! Instead of paying rent every month, you’ll be paying your mortgage payment. This payment is divided up to pay portions of the loan’s principal, interest, taxes, and homeowner insurance.
The toughest transition from being a tenant to a homeowner is the loss of the landlord.
Surprised? Sure, it’s a relief to get out from under a landlord’s restrictions on what you can and cannot do in your home. But what you’ll miss most as a homeowner is your landlord’s deep pockets.
When a pipe springs a leak or the HVAC system dies, the cost of repairs fall on you. Then, there are all the costs of maintaining a home so that you’re not faced with these emergency repairs in the future.
Many financial experts recommend the 1% rule: As a cushion against the unexpected, set aside at least 1 percent of the home’s value each year.
In our real estate practice, we find that far too many homebuyers, especially first-timers, don’t receive the information they need to make smart decisions – something that won’t happen when you work with us.
About the Author:
The above article on There’s more to buying a home than taking on a monthly mortgage payment was provided by Regan Pyke, a leader in the field of sales, marketing, and Real Estate Investing. Regan can be reached via email at [email protected] or by phone at 778-228-2448.
Thinking of selling your home? I have a real passion for buying and selling Real Estate, as well as marketing & real estate investing. I’d love to share my expertise!