When you buy a home, you may be curious to find how much it costs to buy a home. You will want to know how much it will cost you each month (your mortgage payment) and also how much money you will need for Closing Costs. It’s a pretty important question.
Your monthly payment when you own a home will include principal and interest, real estate taxes, HOA dues (Homeowners Association, if it applies), insurance, and Private Mortgage Insurance (typical when you put down less than 20% toward your mortgage).
UPFRONT EXPENSES
There are certain costs to buy a home that you will incur before you get to closing. Typically you need to put down a “good faith deposit”, sometime called earnest money. This is not “extra” money, it’s just a portion of the total cost paid up front (so you owe LESS at closing). This amount varies as a function of the purchase price. For less expensive homes, plan for $5000, for mid range plan for $10,000, for higher end properties, plan for $20,000+.
You will also need to pay for inspectors (home, radon, termite, perhaps well, perhaps septic, perhaps stucco, perhaps sewer line. Assume these costs:
Home Inspection $500
Radon $140
Termite $110
Well $250
Septic $800
Stucco – varies, but budget $1000
Most lenders expect to be paid upfront for the appraisal (budget $500) and an application fee (this one varies by lender).
MORTGAGE COSTS
The first category of expense is mortgage fees.
Budget for $1,300 plus the cost of the appraisal (which some lenders require to be paid up front). Assume $500 for the appraisal.
PRORATIONS
The Seller paid property taxes to the school district, Chester County, and the local Township/Borough/City. You will need to reimburse the Seller for these taxes for the portion of time he has paid, but during which you will own the house. These prorations are based on these periods:
Local and County taxes are based on the calendar year.
School Taxes are based on a fiscal year 7/1 through 6/30.
So, for example, if you settle on the home on January 1, and school taxes are $4000, you would owe the Seller $2000.
ESCROW/IMPOUNDS
For most mortgages, you send your payment to the lender (or their servicer) each month and it covers the Principal, Interest, Taxes, and Insurance and possibly Mortgage Insurance. The lender then pays the bills for taxes and insurance when they are due.
But this fund (called an Escrow Account) needs a cushion to get started in case a bill becomes due and you have not yet paid enough into that fund to cover it. The lender collects this money at settlement. The amount varies depending upon the date of settlement. To get some idea, assume you will need 2 months of insurance, Nine months of Township and County taxes, and 4 months of School Taxes. Assume one month of mortgage insurance. NOTE: You will need mortgage insurance if you down payment is less than 20% of the purchase price.
TITLE INSURANCE
You will need Title Insurance. The cost of title insurance varies with the price of the home. You can get and idea of the cost here.
Other title charges to expect to pay:
Cosing Protection Letter $125
Certifications $150
eDoc Fee $50
Notary $75
Overnight Fee $16
GOVERNMENT FEES
Deed Recording Fee $125
Mortgage Recording Fee $250
Transfer Tax is typically 2% in Chester County PA. However, this is typically paid 50% by the buyer and 50% by the Seller. So expect to pay 1% of the purchase price for Transfer Tax.
For property located in the City of Coatesville, the Municipal Tax is 4%, for property in Tredyffrin Township, it is 3.0%. So expect to pay 2% of the purchase price for Transfer Tax in Coatesville City and 1.5% of the Purchase Price for Transfer Tax in Tredyffrin Township.
MISCELLANEOUS FEES
You are going to pay for one full year of homeowners insurance at settlement. (I have a great guy if you need a quote).
If there is a Homeowner’s Association, you may need to pay a Capitalization Fee. This varies widely but for a rough ball-park estimate, assume $1000. This is the initial amount of money you pay to “get in” to the Association.
If you buy a Home Warranty, you would pay for it at settlement. Assume $500.
There may be a small fee to the Real Estate Broker for your Buyer’s Agent.
You may need to pay for upcoming dues for the Homeowner’s Association.
When you add up all these costs to buy a home, you will have a good idea of the amount of costs to buy a house. These are closing costs.
It is possible to ask the Seller to cover these costs to buy a home.
You will also need the Down Payment. The lowest Down Payment is 3% of the Purchase Price. The Seller cannot pay for this.
