How Much Does It Cost to Buy a House?

When you buy a house, you put an excellent investment strategy into play and give yourself and your family a place to live that is truly your own. It’s an exciting and inspiring time!

However, there are hidden costs to buying a house; the aspiring homeowner needs to be aware of these, so they don’t come as a surprise. Beyond the price of the house itself, there will be inspection fees, closing costs, insurance payments, and more. If you’re wondering what it costs to buy a house, this article will answer all your questions!

Earnest Money and Down Payment

Your earnest money is the deposit you make on the home to ensure that the seller doesn’t accept another offer while you secure financing, arrange for an inspection, and make sure the title on the house is clear. The earnest money is typically 1% to 3% of the purchase price of the home and is paid when you sign a purchase agreement.

The down payment is the largest cost to buy a house, ranging from 0% for VA and USDA loans to 20% and above for conventional mortgages. The down payment is made when the deal closes. Consult with the appropriate government department or your real estate agent about how to buy a house with less than 20% down.

Home Inspection Fee

A home inspection is not required but is strongly recommended. During a home inspection, a qualified professional tours the home’s exterior and interior, looking for structural, electrical, drainage, and HVAC issues, as well as signs of mold, rot, and insect infestation. Getting a home inspection provides you with some assurance that the home will not require major repairs soon after you purchase it. Be advised that home inspections are purely visual, and that the inspector does not check for issues that might be concealed by walls, large pieces of furniture, or flooring.

Home inspections cost between $300 and $500.

Appraisal Fee

The costs to buy a house always include the appraisal fee. Appraisals are required by most lenders to ensure that they’re not lending you more than what the house is worth. Appraisals range between $300 and $500.

Insurance

There are two types of insurance that are part of the cost to buy a house:

Homeowners Insurance

Homeowners insurance is an ongoing cost, but it’s included in the cost to buy a house because you usually need to pay the first full year’s premium in advance at closing.

Private Mortgage Insurance (PMI)

Private mortgage insurance (PMI) is required if your down payment is less than 20%. You may have to pay part of the premium at closing, but some policies allow you to pay it as part of your mortgage. You can buy a house without PMI if you qualify for a VA loan or a USDA loan.

Property Taxes

Your property taxes are based on the value of the home and the local tax rates. Property tax rates vary widely by area but are typically 0.5%–2.5% of the home’s value annually.

Property Survey

The cost to buy a house can include a survey of the property. This is not always needed for properties in developed areas but can be helpful for rural properties or vacant land where disputes might arise.

A property survey costs between $300 and $1000 and can be more for large properties.

Loan Origination Fees

Loan origination fees are the lender’s fees for initiating your mortgage. They include charges for application processing, underwriting, and various other sundry fees. Loan origination fees are typically 0.5% to 1% of your total loan amount.

Title Insurance

Title insurance is a one-time fee that most lenders require as part of the loan approval. This insurance protects the lender from claims against the property that were not identified in the title search.

As the homeowner, you can also get title insurance to protect you financially.

Attorney’s Fees

These costs to buy a house are not required in every state. The fees cover the review of your purchase contract and the closing itself. Where they are mandatory, they run from $500 to $1,500.

Ongoing Fees and Expenses

Once you’re in your new home, there will be continuing expenses, such as:

• HOA fees.
• Maintenance and repairs.
• Utilities, including initial setup costs.
• Municipal services not included in the HOA. This can include municipal water, sewage service, and garbage removal.

Summary of Costs to Buy a House

The Bottom Line: Budgeting is Key!

The total cost to buy a home, once you include all these expenses, can seem overwhelming, but many others have done it, and you can too. Once you have your budget set out, homeownership will feel a lot more manageable. Here’s how to get started:

• Review your full financial picture: income, savings, debt, credit, and non-housing expenses.
• Use an online mortgage calculator to estimate payments.
• Add up all the costs to buy a house and to maintain it.
• Figure out which costs you can roll into your mortgage payments.
• Keep housing costs within 28–32% of your gross monthly income.
• Set up automatic withdrawals from your payroll account to save for unexpected costs like major repairs.

Now that you have the full picture of the costs to buy a house, it’s time to learn how to buy a house, including what to look for, where to look, and how to negotiate the best price. Contact one of the experienced agents at REMAX for information, advice, and guidance!