What out of pocket expenses should I plan on?

I get this question a lot, "What do I need to plan for paying out of pocket when buying a home?" In most cases there are five times that you'll need to come up with money from when you sign a contract to closing on your home.

Please let me preface this with all figures are average numbers and do vary case by case.

The First time is when you come to contract agreement with the seller. At this point you'll need to come up with Earnest Money. The Earnest Money is usually 1% of the sales price. The Second is the Option Fee which is also usually paid at contract agreement. Option Fees are typically $100 to $150 depending on the house. The Earnest Money is used to basically show the seller that you are serious about buying their home, and obtaining it is a remedy used by the seller if you default on the contract. The Option Fee is paid to the seller to give the you the right to back out of the contract during a specified time and receive their Earnest Money back. The Option Period is usually the time that you would call in a Home Inspector.

The Third time you'll write a check will be to the Home Inspector. This fee varies on the size of the house and is usually $300 to $500. Home Inspectors inspect the entire home and let you know of any problems the home has.

Once you've had a good inspection and are ready to move forward with the purchase you'll contact your lender and the Appraisal Fee will be due. Appraisal Fees are in the $350 to $500 range. The Appraiser is the one that makes sure the house is worth what you are paying for it.

The Fifth time is called Cash to Close and, you guessed it, it is the money that you bring to the closing table. This amount is the sum of the downpayment plus the closing costs, minus the Earnest Money and Option Fee as you've already paid them. Obviously this varies widely as downpayment and closing costs are different for every loan. Your lender can tell you what to expect for closing once you've picked a house and down payment amount.

This is a simplified overview but I hope that it is helpful. If you have questions, please let me know at billconover@america-lending.com. 

August Market Statistics

To the right are the market stats for 5 different areas of Austin. Please let me know if you like this format better or worse than the format from last month by commenting on my blog or sending me an email. Thanks for the feedback!
billconover@america-lending.com

Just click on the reports to open a larger view.

5 Remodeling Tips

After many years of remodeling/maintaining my own homes and helping others remodel theirs I've come up with a number of guidelines to save myself time, headaches and money. Below are five that are relevant to just about any project you may undertake.

1. Budget and Timeline. Create a realistic budget and timeline before spending any money. Remodeling is one of those activities where costs can just keep adding up with no end in site. Pricing out your ideas first will not only give you a plan to execute, but in some cases will be a deciding factor in how you go about doing the remodel. Knowing this upfront will definately save you money.

2. Consolidate Tasks. Many times when remodeling there are multiple types of construction that need to be completed. For example when remodeling a bathroom, plumbing, electrical, tile, drywall, trim and painting will all need to be done. For small jobs a lot of the expense is just getting a contractor to the job. If you can find someone who can properly do a couple of the items you won't have to have as many contractors and will save some bucks.

3. Stay Within Your Walls. There are a lot of older houses in Austin and moving interior walls to open up rooms is a popular and cost effective remodel. However, moving exterior walls brings on a whole other set of expenses. Then you have to think about foundation, roofing, siding, access to the existing house and electrical as a minimum. Tying all of these into the original house can get expensive fast. I'm not saying don't add on to your house, but if you do I'd recommend adding a sizable amount of square footage (to increase your house value and cover your additional costs) and budget accordingly.

4. Don't Fix What isn't Broken. When remodeling you'll find all sorts of things that you can alter and/or upgrade. I'd recommend setting out in advance what you will or will not do. If you go outside of your set boundaries, be prepared for your costs to rise. If possible stay away from electrical, HVAC and plumbing as hiring these contractors will cost you the most. *Of course if your plan is to remodel a bath or kitchen or upgrade your HVAC you'll obviously need to hire these professionals.

5. Do It Yourself. The biggest way to save on labor costs is to do it yourself. If there are things that you are confident you can do, and do well, it's in your best interest to do them. I'll put in a disclaimer here that you shouldn't do anything that will put you in harms way. But items such as landscaping, painting and laminate floors can usually be done well by the homeowner. If trying out something for the first time, alway start in a semi-hidden place. You'll make some mistakes at the beginning so it's best to do those in a closet than in the middle of your living room.

I have many other tips that I am happy to give you. If you'd like to discuss your upcoming remodeling project please let me know. billconover@america-lending.com