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Top 6 Things You Need to Buy a Home

Top 6 Things You Need to Buy a Home

So you feel you are ready to buy your first time…apartment living is getting tired and you want a place to call your own. So what is the home process money wise? Do you know all the steps where you will need to start paying fees? What about the down payment? Any other costs along the way? Let’s take a look at the key steps where you need to be prepared to shell out the doe in your home buying journey.

Get Your Mortgage Preapproval

Unless you are paying cash (if so that’s great, move down to the next step), you’ll a lender to qualify you for your home. This process requires you to meet with a lender and give all kinds of fun personal information. Of course the lender will run your credit and get your income info. Once that’s done you’ll know exactly the price range of a home you can afford. Consider this your certificate of buying power!

Prepare your Down Payment

In the step above you’ll also find out from your lender how much down payment you will need. Of course there is a minimum requirement for most loans (3% to 5% of the sales price is typical) and then you can put down more money to reduce your loan amount.

Listen carefully to your lender regarding your down payment. Some loans require what is called “seasoned funds” for the down payment. That means that you’ll need to have that money in your bank for a certain period of time such as 90 days or even six months.

If you need to have seasoned funds then be sure you don’t spend this money or go below the minimum amount for your down payment. Once your account drops, even if replace the money it could count against you and disqualify you for a loan.

Earnest Money

However, even before you hand over your down payment, your first amount that you will spend in your home purchase is called the Earnest Money. This is money that is deposited with a title company or law office as good faith in your intent to purchase the home. Basically it shows the seller you are serious.

There are certain situations where you could risk losing this money if you don’t perform per the contract you have signed with the seller.

The earnest money amount is explicitly stated in the contract and could be point of negotiation. Sometimes a seller may as for 1% of the sales price. Other cases the seller may have minimum amount required such as $1500.

However, be prepared to have this type of money available as the title company will deposit your funds upon receipt.


The next step on your way to home sweet home is the buyer inspection. Certainly a step you don’t want to skip! Even is the buyer is selling ‘as is’ and has said upfront that they won’t do repairs. Hire a independent licensed inspector. This can run you a few hundred dollars to more depending on if your inspector recommends additional inspections.

This is one step you don’t want to skip. Be prepared to pay the inspector at the time of service.

Appraisal Fee

So now you’re humming along, you’ve completed your inspections and are satisfied with your results, giving you a piece of mind. Now your lender will want to order the appraisal. The appraisal gives your lender independent value of the home you want to purchase.

Remember that if the appraisal doesn’t come at a value at least equal to the sales price the lender won’t give you a loan. In these cases you’d want to provide the seller a copy of the appraisal and ask for a reduction in the sales price to the appraised value. Of course the seller may balk at this. This is how the real estate game works.

Closing Costs

Your final expenses will be your closing costs. These costs will be added to your down payment to be paid at the time you close on your home. However, you could negotiate for the seller to pay these expenses.

Typically a seller could pay 1% to 6% of a buyer’s closing costs. You’ll need to check with your lender to see if your loan allows it. In most cases the answer is yes. However be aware that the seller will net less if they contribute to a buyer’s closing costs.

Seller have been known to increase the sales price to compensate for this net reduction. Depending on how hot your market is you may face this too.

Of course if it’s a buyer’s market you’ll be able to negotiate closing costs easily since seller want you to complete the purchase.

So now you see the whole story and what points of the home buying journey you’ll to need to shell out some cash. As long as your are prepared for this it will be a smooth while exciting home buying process!


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