Real Estate Entry Fee: What are the Cost's?

Last video we briefly discussed  Down Payment and Closings Costs.
 


Sometimes consumers find these two are the most confusing aspects of the finances so I wanted to give them extra attention here...
 


1. Down Payment


There are several loan types:
FHA = 3.5% Down Payment
Conventional can be 5%, 10%, 20% or more!
Let's take a 5% Conventional loan as an example ... If you are buying a $300,000 house, your down payment will be $15,000. Simple enough.
 


2. Closing Costs
These are the other costs associated with purchasing outside of the down payment. Some examples include:

- Prorated Taxes/Utilities - Depending on when you actually settle, you'll pay back the seller for any taxes or utilities that they have already paid into the home.

- Title Insurance - Every home purchased with a mortgage will require title insurance. They handle the majority of the logistics for compiling the legal documents required to close and provide you with a Title Insurance Policy to protect your ownership in the property for a time period after settlement.

- Lender Fees - When you obtain a mortgage, fees are paid out to the company that packages all of the financial documents needed to issue the loan.

- Homeowners Insurance - Often you will pay a portion of your homeowners insurance premium for the year upfront at the closing table.
 


All of these can be estimated by your Lender when obtaining your Pre-approval Letter so you can truly understand what your total out-of-pocket cost is going to be at settlement day.
 


Coming back to the $300,000 purchase example ... if you take the 5% down payment of $15,000, closing costs could be in the range of $9,000! That means our total out of pocket will be $24,000.
 


*HOWEVER*
 


There is a way to reduce this amount by creatively structuring our offer. We can ask for something called a Seller Concession which would reduce your closing costs burden and make it more affordable!

We'll touch on this in the next video