Typically, most people only calculate the down payment when anticipating the cost of buying their home. There are a few costs that you should be expecting to encounter:
- Your down payment: depending on loan program, you can get into your home with as little as 3.5% down payment. Different loan programs allow for a variety of down payment options so be sure to ask your loan officer to examine all available loan programs that you are eligible for.
- Closing Costs: There are always programs that will allow the lender or seller to pay your closing costs. If this is not part of your deal, you should be expected to pay these costs out of pocket. Your closing costs are dependent on your loan amount so ask your loan officer for a complete, detailed itemization of fees expected in conjunction with your loan.
- Escrow Items: When you close on your home, you will be expected to pay into your escrow account. This is done so in order to ensure that as you pay your mortgage, your taxes and insurance are going to be adequately funded. On a purchase, you should be expected to pay 3-5 months of taxes into your escrow account and 2 months of homeowners insurance. This is calculated depending on where in the escrow cycle you fall when you close.
- Taxes: If your loan closes within 45 days of the next tax payment being due, it’s likely that you will prepay these taxes at the closing in order for your escrow payment schedule to be on time.
- Homeowners Insurance: You will be required to pay your homeowners insurance in full prior to closing. This way there will be full coverage in place at the time you close.
- Final adjustments from the town/seller: Typically, you will be responsible for any oil that is left in the tank, final water or sewer readings, condo fees and things of that nature with the seller.
Most people do not anticipate everything that is truly going to be included in the process, you should be prepared for these costs beyond simply your down payment and closing costs. Ask your loan officer for more information.
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