How Much Does it Cost to Buy a House?
Let’s be honest, that’s what you really want to know isn’t it? I’ve never been a fan of shopping for something if I wasn’t sure I could pull the trigger and buy if I wanted to. So, let’s cut to the chase and answer the big question about cost. I’ll break it down into four key components; looking at houses, deposits, closing costs, and downpayment.
How much does it cost to look at houses with a Realtor?
Not a dime (usually).
In most cases, real estate transactions are cooperative. That means that there is a Listing Realtor (the seller side) and a Selling Realtor (the buyer side). The seller pays a commission as part of their closing costs. This commission is paid to the Listing Realtor’s office and is shared with the Selling Realtor’s office. So, no charge to the buyer for real estate commission.
When the transaction does not involve two Realtors, for example a home sold by owner, and a commission is not offered the buyer may be asked to pay for services rendered. This will come up occasionally. It’s a good idea to chat with your Realtor about this before looking at houses sold by owner.
There are some situations where a Selling Realtor may be charging a showing or transaction fee. There are a few new brokerages popping up in Oklahoma City that are following this business model. Every service provided by a Realtor has a separate fee and buyers are charged cafeteria style for the services they need. It’s not very common but a good question to ask. I don’t do this, in case you’re wondering.
How much will deposits cost?
For this, we’ll refer to anything paid before closing as a “deposit.” There are a few to keep in mind;
- Earnest money: Paid at the time of an offer, usually about 1% of the purchase price. This is a negotiable item in the contract. Paid by personal check. This deposit will show as a credit toward down-payment and closing cost on your settlement statement at closing.
- Inspections: Paid at the time of service. A basic whole house inspection will cost around $350 with extra fees to inspect items like pools, sprinkler systems, wells, and septic. A basic pest inspection (termites) will cost around $100. Many inspectors are now set up to accept credit card payments.
- Appraisal and credit check: Paid to the lender very soon after an offer is accepted. The appraisal fee will cost around $500 plus an extra credit check fee of $20. Some appraisals may cost more if the house is atypical or the site is rural. Most lenders can accept credit card payment for this service.
When buying a $200,000 house, immediate out-of-pocket expenses can be around $3000 for deposits.
How much will closing costs be?
Several factors come into play when calculating these costs including loan amount, closing date, and interest rate. Typically buyers pay between 2-3% of the purchase price in closing cost. About $5000 on a $200,000 home. The closing costs fall into six categories that include;
- Items associated with your loan: origination, application, appraisal, credit
- prepaid items: prepaid interest, homeowners insurance for one year
- Reserves deposited for escrow: 4 months taxes, 2 months homeowners insurance
- Title charges: closing fee, title insurance for you and for lender, title report, title exam, gap search
- Government recording: recording fees, mortgage tax
- Additional charges: home warranty, etc
It is possible to negotiate payment of your closing cost be made on your behalf by the seller. Consult with your Realtor to see if this strategy makes sense for your situation.
How much down-payment do I need?
That depends. The least down-payment required will vary depending on the type of financing you are getting.
- VA Mortgage: 0% down for qualified veterans and service members
- FHA Mortgage: 3.5% downpayment is required but could be higher depending on your credit score or the type of home you are buying.
- Conventional Mortgage: 5% minimum but will also need Private Mortgage Insurance (PMI). To avoid PMI, borrowers need 20% down.
- USDA Mortgage: 0% down for qualifying rural properties
When buying a $200,000 house, the minimum down-payment can be between $7000 and $10,0000 unless you are a veteran or the home is in a qualifying rural area. This is paid at closing.
What’s the bottom line?
The cost to buy a house priced at $200,000 with 3.5% down, is around $13,000.
- Closing Cost Total: $5000
- Down-payment: $7000 (3.5%)
- Deposits: $2500 (earnest money and appraisal fee)
- Expense for inspections and services: $500 (non-refundable)
Approximate upfront expense: $3000, approximate cash to close: $9500
Standard disclaimer: these example cost to buy a house figures are estimates based on a typical $200,000 home purchase. Actual numbers should be obtained from your favorite lender as some fees may vary.