How Much Do I Need Out-of-Pocket to Buy A Home?
Well, the straight answer is..it depends. One of the biggest misconceptions when buying a home is that you only need money for a down payment.It is important that buyers are informed and knowledgeable about the entire home buying process, it reduces stress during the transaction. Let’s break down the out-of-pocket costs pertaining to buying a home in the Eastern Panhandle of West Virginia. It is important to understand what you are getting in to!
Down Payment
A down payment is a cost that varies depending on the type of financing a buyer obtains. The amount of your down payment will reflect the type of mortgage you are pre-approved for. Go get pre-approved!
Some of the most common home loan programs are listed below. It is important to discuss these options with your lender so you know exactly where you stand.
USDA Loans
The Eastern Panhandle of WV is part of the USDA loan program. This loan allows buyers to finance 100% of the mortgage. This is a very popular loan type in the Panhandle. While there is no down payment, there are still closing cost required to buy a home.
Conventional Loans
Conventional mortgage products are an option for buyers. There are many different types of conventional loans with the most common being the 5% down product. This loan requires a buyer to put down 5% of the purchase price. Conventional loans typically require a buyer to have higher credit scores than a FHA loan.
FHA Loans
FHA, which stand for Federal Housing Authority, is another popular loan type because it requires a smaller down payment. An FHA Loans requires a buyer to come up with a 3.5% down payment.
VA Loans
VA Loans, which stands for Veterans Administration Loans, allow a buyer to finance 100% of the mortgage. This allows a buyer to not have to come up with any money for the down payment. Even though the down payment required is zero, there are other costs to buy a home.
Earnest Money Deposit
The Earnest Money Deposit or EMD is the first out-of-pocket expense you will run into when buying a home. When you write a contract and EMD is provided to the seller to show in good faith that you are committed to the purchase of the home. A check, typically $500-$1000 is deposited in the listing or buying brokers account at the time of ratification. The EMD is held until closing and then credited back to you on your closing documents.
Inspection(s) Costs
The most common inspections are home inspections & radon tests. These inspections typically occur during the first 2 weeks after ratification.
The typical costs for a home inspection are between $400-600. More sq footage can increase the cost. A radon test runs between $150-$250.
Appraisal Fee
Another upfront cost to buy a home is the appraisal fee. An appraisal is required anytime a buyer is obtaining a mortgage. A home appraisal is an unbiased estimate of the fair market value of what a home is worth. Lenders order an appraisal during the mortgage loan process so that there is an objective way to assess the home’s market value and ensure that the amount of money requested by the borrower is appropriate.
The cost of an appraisal can vary but generally range from $500 – $650.
Final Thoughts
When deciding if it is the right time to buy a home, it is important to take all costs into consideration. After downpayment, I recommend that my clients have approximately $1500 on hand to use for out-of-pocket home buying costs.
Are you considering buying home in the Eastern Panhandle of WV? If you are not working with a top real estate agent in the Eastern Panhandle of WV, I would love to help assist you in the home buying process. Get in touch!
I service the following areas: Martinsburg, Inwood, Hedgesville, Bunker Hill, Falling Waters, Berkeley Springs, Shepherdstown, Gerrardstown, Charles Town, Ranson.
Monika Foster
RE/MAX 1st Realty
1221 Hedgesville Road Martinsburg, WV 25401
304-676-2943
monika@monikafoster.com
