How Much Upfront Money Do You Need To Buy A Home?

Abby Husbands
Published on June 27, 2018

How Much Upfront Money Do You Need To Buy A Home?

Did you know you’ll need to bring more cash to the closing table than just your down payment? Well, sit back as I discuss exactly how much cash you’ll need to save for closing day.

By now you probably know that you need to save for your down payment which is anywhere from 3.5% to 20%. We’re also going to be basing all of this information off of a $300,000 single-family residence. The first thing you’re going to want to realize is that you will be responsible for paying for your closing costs in addition to your down payment. For argument’s sake, we’re going to use a 10% down payment in this equation.  A 10% down payment on a $300,000 home is $30,000. The closing costs are usually 2%-3% of the sales price. We’ll use 3% & 3% of $300,000 is $9,000. Right now you have your down payment of 10% and your closing costs of 3%. There are other costs that will come up prior to closing, and we’ll go over a few of those right now.

#1. When you make an offer on a home, you’re going to put down your earnest money, which is your deposit, and your option fee. For a $300,000 house, you will need $3,000 in earnest money and a $300 option fee. This is the way that we do things in Austin. Just know that your ernest money and option fee will be credited back to you at closing, but I bring it up because you’re going to need that cash beforehand, up front, so that’s number one.

#2. During your option period, you’re going to get a home inspection. You’ll hire your own home inspector and that fee, although it varies from inspector to inspector, is typically around $400.

#3. Depending on what the sellers provide or if your lender or title company won’t accept the existing survey, you may have to purchase a new survey.  You can pay for it at closing, however, that’s going to be another $400 to $500 for a single-family home. I’m not talking about acreage because those can be anywhere from $1500 to $3000+, so right now that’s another added expense on top of your down payment.

#4. The next one is a home warranty. Again, most sellers will pay for your home warranty and as your buyer’s agent we write it into the contract, and $500 usually covers a really great home warranty for that first year that you own that home. If for some reason you have a seller that is not willing to pay that for you, you may need to buy your own home warranty which we all strongly suggest for that first year. This does not pertain to most new construction. These are just for resales. A good home warranty is $500+ in the Austin area.

#5. Something else that you will need to pay for but it’s usually in your closing costs, in an appraisal.  Depending on the loan product you’re using you may have to pay for your appraisal out-of-pocket. Your appraisal is typically rolled into that 2% to 3% closing costs, but if for some reason you have to pay for it outside of closing that fee is $450 for an appraisal.

#6. Other items you need to consider like are you new to a city? Are you going to have to pay deposits for your utilities, your water bill, your electric bill? Are there any minor repairs you’re going to want to make before you move into that home, like painting, replacing floors, any swapping out light fixtures, or any of the plumbing fixtures? Not to mention your moving expenses. If you need to get a moving truck, boxes, hire a moving company, that’s another added expense that you will need to consider when you’re purchasing your home.

To sum it all up, what you need on top of your10% down payment which is $30,000, there will be 3% in closing costs that you will need to bring to the closing table, that’s $9,000. Then, you will also need your home inspection of $400. A survey, possibly, for $500. A home warranty for $500. Keep in mind this is worse case scenario, you will need to bring a grand total of $40,400 to closing.

Thanks for checking out my blog & vlog!

I’m a full-time Realtor®️ with a background in design & construction & I love all things real estate related. I’m lucky enough to live & work in Austin, TX. Check out more of my website & shoot me a message if you need help buying, selling, relocating, or investing in Austin real estate. 

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