ONE TRILLION DOLLARS! Just kidding.
But it can be easy to under-estimate the costs associated. I meet many people that talk about the $$$ they are saving for a down payment. That's fantastic and a great goal. I'm going to breakdown associated costs that seem 'hidden' and aren't included in a down payment.
After a seller accepts a buyer's offer the amount of cash needed to buy a home is "cash to close". This amount includes an earnest money deposit, down payment, and a few other costs associated with closing. It's an important number to discuss as these are all 'hard' costs that a buyer can't typically avoid. In other words, a buyer can choose which title company to use but shouldn't avoid using one at all (there are a few exceptions). Closing costs can vary but are generally 2%-5% of the total sales price. Yes, that's 2%-5% in ADDITION to the sales price.
Here's a brief list of some big fees associated:
-Title Insurance
-Loan Origination Fees (assuming a buyer uses a traditional lender i.e. a mortgage company)
-Attorney Fees
-Government Purchases taxes and fees (regular taxes one pays when buying a property)
In the city of Richmond, the above fees add up to roughly $5,000 using a $200,000 mortgage as a guide. So for those of you saving towards a down payment don't forget you will need more cash on hand than just the amount for down payment. Check out this cool calculator if you want to play around with the numbers yourself.
The good news? There are several ways a buyer can absorb some of these costs. My strategy allows buyers who have less cash on hand to afford closing costs. In other words, the cash to close amount will be remarkably less. I'd be remiss if I said my strategy isn't a secret-many agents are aware of this approach and utilize it. But, the execution of this strategy is what makes me successful in these situations. Not all agents are equally skilled or crafty. If you haven't read my last post I talk a little bit about the power of negotiation and the how this affects a home purchase/sale. Simply put, strategy and negotiation are where good agents stand above the rest.
Shoot me a message if you'd like to talk more about the cost of buying a home or have a thought to share!
