You're going to purchase your first home. You've already been pre-approved with a mortgage rep. and your working with a REALTOR. You find a home you think is the one. Whether you're putting money down or going with a Zero down gift program, there are other, what I call, out of pocket costs. When working with first time buyers, I've noticed that most people were unaware of these prior to me explaining the process.
Out of Pocket Costs, You Should Be Aware Of: 
- EMD or Earnest Money Deposit - even if you are going with a zero down program, you typically need to put down an earnest money deposit. This is typically done by you writing a check, the check is held in escrow and will be credited to you at your closing. The reason for this money is to show the seller that you are serious about purchasing their home, your putting down this money as a show of good faith. The amount varies depending on the home and market place, it can range from $500 min. to several thousands of dollars, your REALTOR can help advice you as to how much would be an acceptable amt.
- Private Home Inspection - It is always advisable to get a private home inspection. The inspection is usually done 5 - 7 days after the acceptance of your offer. You will need to pay the inspector at the time of the home inspection. The price usually ranges from $200 to $400, depending on the home and the inspection company.
- 1 Years Home Owners Insurance- Yes, your lender is going to require that you have a 1 years home owners insurance policy paid in advance. This needs to be paid, prior to the closing date. The prices can vary, so I usually recommend that you shop around with a couple different insurance companys.
I hope this post has helped to inform you or refresh your memory on the process of purchasing a home. Those are the 3 costs you need to be aware of between the offer getting accepted and closing. If you're thinking of purchasing your first, second or third home, I'd be happy to assist you, and work for you as a Buyers Agent. For more information on Macomb County Real Estate call Mike Mitchell 586-291-2652
pictures courtesy of real estate clip art.
Mike, great article. So many times first time home buyers are not aware that even with a -0- down program (such as MyCommunity) that there are upfront costs to home ownership that they should prepare for and plan on. Nice job.
Mike,
I would tend to add the appraisal cost as an out-of-pocket as well. Although not universal, it's pretty common to have the buyer pay for the appraisal upon delivery.
For whatever it's worth, I have had customers who have put the above costs into the closing and paid for them with seller's concessions. Most programs do want to see at least $500.00 of the purchaser's own money in the deal somehow, somewhere - but other than that the concessions can "cover all." And the insurance can be paid at close in that fashion as well.
Not that I'm recommending that someone do a purchase for a grand total of $500.00 out of pocket, but it can be done.
Good advice on your part with this post!