As a buyer, the process of buying a home is exciting but can also be overwhelming too. There's so many things to consider and to do. See the blog post about what to know 'before entering into a contract to buy a home'.
1. You need to make sure you have good credit.
2. You need to make sure you have money for down payment, preferably 20%. Under 20% downpayment, you will need to pay PMI, or private mortgage insurance.
3. You also need to have money for closing costs. Closing costs can run 3-5% of the purchase price of the home.
So what are these closing costs, and who pays for what?
Closing costs are the fees associated with preparing the settlement of the property to transfer ownership from the seller to the buyer. There are numerous documents that have to be prepared and signed for the transfer to be legally documented and acknowledged.
Below is a link to the table of the fees and who customarily pays for what aspect. Some items can be negotiable.
Just to give you an example of how much you will need to have at closing, here are two scenarios on a $300,000 purchase.
A. 20% is put as down payment, this is $60,000. Closing costs will be about $8000. So at closing, you will need to have $68,000. Mortgage payments will be about $1500/month.
B. Same home, but this time only 5% is put for down payment on the loan, or $15,000. In this scenario, closing costs will be about $9700. You will need about $24,700 at closing. Mortgage payments will be about $1875/month since you are also paying for PMI (private mortgage insurance).
Coldwell Banker, Realtor
St. Petersburg, FL
Phone: call/text 727-430-2350