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'How Much Money Will I Need?'
In addition to qualifying for a home loan, buyers – especially first-time buyers – want an idea of how much money they need in their bank account to complete the transaction.
You will need cash on hand for the deposit, home inspection, down payment (if you don’t qualify for down payment assistance programs), loan-related expenses, closing costs, and moving expenses.
Deposit: When you make an offer, you need to write a check for 1-2 percent of the amount you are offering. This check is held uncashed by your agent’s broker until you and the seller have reached an agreement and escrow is opened. The check is made payable to the brokerage that is preparing the offer for you and is forwarded to the escrow company, which then deposits it into your escrow account. (If you don’t reach an agreement, your check is returned to you.)
Home Inspection: You will want a professional inspection of the property to verify its condition and may also want additional inspections by contractors in specific fields. You will need to pay at the time the inspection is conducted. A general home inspection will cost about $275.
Down Payment: Your down payment must be at least 3.5 percent of the purchase price if you want an FHA loan to purchase a home you will live in. If you are purchasing the home as an investment property that you will rent to others, you will need to pay 20-30 percent down and show you have a certain amount of equity in the home you live in and any other rental properties if their income will be used to qualify for a new loan. I can refer you to a reputable lender if you wish. If there is a lender you have used in the past and want to use again, that person can give you more specific information. Many cities have down payment assistance programs to provide the down payment for first-time buyers with limited income.
Loan-Related Expenses: The amount of your home loan will depend on the price you and the seller have negotiated, minus your deposit and down payment. In addition, there are some expenses required to obtain a loan which must be paid by you directly. Most lenders require you to pay for an appraisal of the property under consideration and also to pay when documents need to be notarized. Again, your lender is better qualified to give you specific information about these expenses.
Closing Costs: The expenses required to complete the sale - obtaining the loan, escrow, title, pre-paid taxes and insurance, for instance - are lumped together as Closing Costs and must be paid before escrow can close. Sometimes the seller will agree to pay most or all of a buyer's closing costs as part of the contract. If the seller does not agree, you must be prepared to pay them.
Moving Expenses: Edison, the Gas Company, water and trash collection companies all will want deposits if you do not already have accounts with them. You may also need to hire someone to move household items to your newly purchased home.
I will be happy to meet with you and discuss your plans and how I can help you accomplish them. Call me at (909) 261-3541 so we can set up an appointment.
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