Are you ready to take the leap into homeownership? Buying your first home can feel like a whirlwind of terms and numbers, but fear not! At Faith Nicole Realty, we believe in empowering you with knowledge. In this blog post, we'll break down some of the key terms and costs you'll encounter on your homebuying journey.
Let's dive in!
First Things First
Option Fees, Inspections, and Earnest Money
Option Fee (OP): This fee, typically around $100-$200, secures the home for a specific period while you conduct due diligence. For direction an OP is typically $25 a day for a 5-7 day period. During this period, an inspector will assess the property, ensuring the home's condition before an Appraisal.
Inspection Fees: A general home inspection costs around $350, while a WDI (wood destroying insect) inspection adds about $125.
Earnest Money Deposit: This is a good faith deposit, usually 1% of the purchase price, that shows your commitment to the purchase. Similar to an apartment security deposit it will be credited back to you at the closing table if you proceed with the purchase or refunded if the contract is terminated within terms.
Downpayment: Down payment options vary depending on your credit score. With a credit score of 580 or above, you can qualify for Down Payment Assistance (DPA) through my partnered lenders. Alternatively, you can opt for down payment options as low as 3%. Sometimes, buyers who qualify for DPA choose to opt-in to paying a down payment to enjoy potential benefits such as a lower mortgage interest rate, exemption from Private Mortgage Insurance (PMI) or Mortgage Insurance Premium (MIP), and the absence of a second lien, leading to significant reduction in total monthly mortgage payments.
Seller's Concessions: This is an arrangement where the home seller agrees to contribute a specified amount towards the buyer's closing costs or other expenses related to the home purchase. The likelihood of the seller covering your closing costs depends on several factors.
Closing costs: When purchasing a home, refer to the fees associated with the transaction. These costs are typically paid on the day of closing, when the property title is transferred from the seller to the buyer. The above mentioned seller credits can be applied here to reduce your out-of-pocket expenses.
These can include:
Origination fees: These are charges paid to the lender for processing your loan application.
Discount points: Optional fees paid upfront to reduce your interest rate.
Appraisal fee: The cost of a professional assessment of the property's value.
Title search fee: The cost of researching the property's title history.
Title insurance: Protects you and your lender against claims to the property's title.
Property taxes: Estimated based on the property's assessed value.
Transfer taxes: Taxes imposed by the state or local government when property ownership changes hands.
Homeowners insurance: The cost of insurance to protect your property.
Escrow fees: Fees charged by the lender to hold funds in escrow for items like property taxes and insurance.
Once you have a specific property address, your lender can provide a Loan estimate of these costs. Factors such as the property's location, size, age, and condition will influence the exact amounts.
Discuss your options with your realtor, and they’ll guide you through the negotiation process! Remember, every homebuying journey is unique. Our team at Faith Nicole Realty is here to guide you through EVERY step, ensuring you're informed and prepared every step of the way. Let's make your dream of homeownership a reality!
Please feel free to reach out with any follow-up questions regarding the contents of this informational, or any real-estate related advise.
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