If you are like others who have been saving money to start shopping for homes for sale, you may have worked hard to save up your down payment. However, there are other expenses associated with buying a house you may not have considered. Too many first time buyers make the mistake of saving barely enough for the house, only to find out later they may have to shell out more money. When you want to ensure you have enough cash available to close on your new home, consider the following important points.
One of the most significant additional expenses related to buying a house is the cost of its third party vendor reports. In some cases, the seller will pay for the appraisal and property inspection, and this will be determined in your sales contract. If the sales contract states that the buyer is responsible for them, keep in mind you could pay several hundred dollars more per report for these. Some of the reports may come back indicating the need for additional reports, such as a roofing inspection or a pest inspection. If this happens your costs can increase, leading you to pay for more than just the down payment.
Another point to consider is reserves. This is not an actual expense, but you will need cash on hand for the reserves requirement. Most lenders require you to have two to three percent of the sales price on hand after closing. Often, this needs to be in liquid assets, such as stocks or cash, rather than in a retirement account. It pays to have something saved even if you don’t end up using it to fund your home purchase.
The last thing you want is to discover is that you do not have enough cash on hand to close. Therefore, estimate on the high end when determining how much money you will need to close, and do not forget to factor in money for the third party reports and the reserves requirement. Still, it’s best to ask a trusted real estate agent what it will take to get you into your dream home.
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