When it comes to questions surrounding home financing, especially with first time homebuyers, one of the most common questions is “how much money do I need to buy a house?”.
The cost associated with purchasing a house can be broken down into three different categories: down payment, closing fees and prepaids.
Down Payment: there are many factors that help determine the minimum down payment requirement such as credit score, debt-to-income ratio or first-time homebuyer eligibility. In general, the minimum down payment would be either 0%, 3%, 3.5% or 5% of the purchase price depending on program eligibility.
Closing Fees: this can be broken down into several different sections, including Origination Charges, Services You Cannot Shop For, Services You Can Shop For and Taxes and Other Government Fees.
- Origination Charges typically include the processing and underwriting fees which are generally $535 and $725 respectively.
- Services You Cannot Shop For typically includes the appraisal fee, credit report fee, flood determination fee and fraud report fee which are generally $375, $78, $13 and $16 respectively.
- Services You Can Shop For typically includes the abstracting and title search, lender’s title policy and title examination which are generally $75, $175 and $195 respectively.
- Taxes and Other Government Fees typically include the recording fees which are generally $145.
* Fees quoted are per Community Choice Credit Union and may vary with other lenders.
Prepaids: refer to the funds required for an escrow account to pay the property taxes and homeowners insurance premium as those items come due. The funds required for the prepaids category are determined by the property itself, based on the property taxes for the specific home as well as the homeowner’s insurance policy.
In factoring in the overall cost of the home purchase, it’s important to also be aware of any credits that you as a buyer could potentially receive. The most common are a tax proration credit and seller paid credit. These are credits that can be applied to the overall cost of the transaction to decrease the funds that will be required at closing.
The bottom line is that there are many items included in the cost of a new home purchase. The best way to get the most accurate information for your own personal situation is to contact your trusted Mortgage Loan Officer.
Joe Hayhoe
Mortgage Loan Officer, NMLS 873387
Community Choice Credit Union
515-850-9011
