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.