Out of Pocket Costs

Out of Pocket Costs to Purchase a Home 
These out of pocket expenses are not a percentage based on the home your are buying. The costs I have listed do not very much. The only thing that is based on the loan you are getting is the principal down for the loan.

I am providing you with most (not all) of the out of pocket costs that you may have to pay. This is with the assumption the seller will not pay anything. This is also based on a loan amount of approximately $200,000 (*Starred items are loan specific*) Your total home purchase out of pocket expenses will be between $7,000 and $10,000. Lender will also want you to have approximately 6 months worth of mortgage payments in the bank after your purchase expenses are paid.

PART A – (overall escrow)  
These are out of pocket expenses at the time service is performed, which have NOTHING to do with the type of loan you will be getting. They are listed in typical order due

$500 – $1,000 – Earnest Money – At time of contract acceptance. This can come from anyone. It gets cashed and held at escrow. This can be personal check, or cashier’s check, wire transfer, NOT Credit card
$275 – $325 – Home Inspection – Within 2 weeks of opening escrow. Paid at time of inspection. This can come from anyone. Paid with cash/check or credit card
$75 Approximately – Pest inspection – Could be paid though escrow. This can come from anyone. Check, Credit card
$400 – $600 Appraisal* – This is paid within about 2 weeks of opening escrow. Must come from buyer*
$2,000 – $5,000 – Escrow/Title fees – This is due about 5 days prior to close of escrow. This must come from buyer. This MUST be certified funds: Cashier’s Check, Money Order, Wire Transfer. $1,500 Escrow & Title Insurance costs. $2,500 Approximate loan costs (this is about 2% of the loan) * These are typically 1% origination fees & 1% processing, underwriting and other office costs.  $1,200 – The first year of homeowner’s insurance is part of these costs. After that they are typically included in your monthly mortgage: PITI $1,000 prorated property taxes typically just under 1% of the sale price. Based on a calendar year.  $200 – $1,000 HOA Transfer fees (if applicable). $500 – $600 – Home Warranty – Usually included in closing costs. We will TRY to get the seller to pay for this.

PART B (Loan Items)
This is a percentage of the sale price of the loan. This is what the lender may require you come out of pocket with prior to close of escrow.

Basic money down for various loans. This has nothing to do with Part A These have to be certified funds (cashier’s check/wire transfer)
These are due about 5 days prior to close

0.0% for VA Loans
3.5% of sales price for an FHA loan – Based on $100k loan = $3,500
10% of sales price for some other loans    – Based on $100k loan = $10,000
20% of sales price for most conventional loans    – Based on $100k loan = $20,000
30% down is typical for any investment property

PART C (seller concessions)
This is very hard to get in this market in 2020, 2021 & moving forward.
Requesting seller’s assistance can be as much as about 3.5% (4-5% sometimes) of the sale price.

The typical seller’s assistance may cover all or part of the:

• Appraisal, Escrow/Title Fees, Home Warranty, Misc. Costs.

Additional costs can include things such as:

• Engineering certification for anything attached to the manufactured home such as patio, AZ room, awning – $600***
• Tie downs/Retrofitting the under carriage up to about $2,000***

PART D (immediate after escrow costs)

The fees you have after your purchase are typically:

• Internet connection
• Gas turn on OR propane and propane tank deposit
• Cable or Satellite
• Water turn on deposit of about $100
• Moving truck
• Electric turn on deposit of $600: get a letter of good standing from your current electric company and this is waived

Lender Information
I would prefer you to use one of our many local lenders located  in the area due to the local idiosyncrasies, customs and courtesies.
Submit the following items to the lender you are going to be using:

This is a basic list. The lender may ask you for other paperwork.

A. The most recent copy of mortgage statements or Rental information for borrowers who are purchasing
B. The 2 most recent months bank statements on ALL accounts -All pages (checking, savings, 401K, stocks, i.e.: anything else of value)
C. The 2 most recent copies of W-2’s (2019 – 2020) If self-employed, then bring the complete tax returns & 1099s
D. The most recent month worth of paycheck stubs (30 days) & award letters
E. Copy of homeowner’s insurance and Homeowners Association Information (as applicable) (Renter’s Insurance, etc.)
F.  Bankruptcy Papers, if applicable
G. Divorce Papers, child custody papers, etc. if applicable
H. Your first born (humor)

Why Should You Get a Loan Approval Even Months Prior to Buying:

1. The lender provides you with the REAL scenarios for your purchasing power after you have submitted all your required documentation. I could give you different monthly costs, which don’t mean anything till you get that lenders approval.
2. None of the sellers are accepting a purchase offer without the buyer having submitted all the necessary documentation to the buyer’s lender.
3. As a buyer you will not know how much or how little house you can buy without going to the lender first.
4. Unknown bad things can be on your credit report that can take up to 3, or 6 months or even longer to fix.
5. You are wasting your time by looking at homes that might be outside your budget.

Requesting Maximum Loan Amount
Please ask your lender for as much as possible, here is why:

Scenario ONE:
The buyer (you) gets approved for $200,000.
We will be looking at properties up to about $225,000
Why you ask, because we will try to negotiate them down to the $200,000
We start negotiations and are able to bring the sale price down to $205,000
Now the buyer (you) needs to get COMPLETELY re-qualified. This takes a long time

Scenario TWO:
Buyer gets qualified for the maximum amount, which is $600,000
Buyer still only wants to spend up to $200,000
We will still look at up to $225,000
Same negotiations, same reduction to $205,000
Now we can move forward comfortably since you, the buyers, are already approved for $600,000.