Back to Part 1.
…While the monthly payment is important for evaluating the ongoing cost of financing your home purchase as it relates to your monthly income, the down payment, closing costs, escrows and reimbursements make up a sizable upfront investment that will require liquid assets. How much do you have in savings?

Part 2: Upfront Costs, More Than Just a Down Payment

The down payment itself is a big deal; a $350,000 home purchase with an FHA mortgage and 3.5% down will require a roughly $12,250 down payment. The same $350,000 home purchased with 20% down will require roughly $70,000. Again, how much do you have in savings?

Closing costs…what’s included and how much will they be? Closing costs mainly consist of mortgage origination, title insurance, inspections, transfer tax, recording fees and upfront condo fees. There are plenty of variations on this. The big closing cost numbers generally come from the title insurance policy itself and transfer tax. The number of inspections you elect will have an impact, as will where the settlement date falls within the month since part of the closing cost comes from pre-paid mortgage interest to the end of that first month. How much the actual closing costs will be can fluctuate a lot, but they are fairly easy for your real estate agent to calculate when the time comes. Figure on between 4 and 6% of the purchase price, but keep in mind that they can be more or less depending on the circumstances of each transaction.

Escrows and reimbursements make up the rest of the upfront investment. Escrows are collected by the mortgage lender at closing and can include real estate taxes (municipal, county, school), condo fees and mortgage insurance. Two months of condo fees and mortgage insurance are typical. The real estate tax portion tends to vary depending on when your purchase occurs with reference to when real estate taxes are paid. Don’t get too caught up with trying to reduce this portion of the upfront investment by manipulating the closing date, the amount reimbursed to the seller is inversely related to the escrow (not including mortgage insurance). Smaller escrow = larger reimbursement to the seller and vice versa. Ready to buy a house yet?

Please call or email me today if you are ready to get started, or read on for Part 3.
Cell: 215-520-7166 or Email: neil@realtorneil.com.