How much money do I need to buy a home? is a question that is regularly asked from homebuyers, especially from first time homebuyers. It's a normal occurrence as costs tend change over time. In this article, we'll dive into a typical homebuyer's costs for purchasing a home.
In a previous article Buying a Home Zero Down Doesn't Mean Free it was discussed that zero down loans are often confused with zero cost to buyers for purchasing. Equating zero down to needing no funds to purchase isn't readily discussed within the industry and in real estate blogs. So let's break it down as those items are very different.
Besides downpayment, whether its a zero down loan or not, there are other costs incurred when buying a home.
Home Purchasing Costs Include:
- Earnest Money
- Home Inspection
- Closing Costs
What is Earnest Money? Earnest money is funds put up with an accepted purchase and sale contract, usually a personal check, money order, certified check, or wire. Those funds are held in a trust account at the closing company, typically the escrow firm, until closing. Upon closing, those funds are applied towards closing costs or refunded in the event a purchase and sale contract terminates. There are other scenarios but for sake of argument we'll not venture down that path.View More