While shopping for a home, you’ve likely heard about down payments and closing costs. If you’re looking into buying a home for the first time, though, you may not know exactly what those fees entail and when they’re due.
We’ve talked before about earnest money — a check due shortly after the contract is accepted by the seller that acts as good faith money ensuring the seller than the buyer is serious about going through with purchasing the home. This is money the buyer wouldn’t get back if they changed their mind and decided not to buy.
While earnest money can go towards a down payment, the down payment itself is different. Your down payment on a home is the amount of the purchase price a buyer pays that is not financed in a mortgage loan. The total sales price of the home being purchased is the sum of your down payment and the total home loan.
Lenders will specify a minimum amount due for the down payment. If you have an FHA loan, the down payment can be as little as 3.5 to 10 percent. With a conforming loan, such a Fannie Mae and Freddie Mac, 3 to 20 percent down is required. For those who qualify for a Veterans Administration (VA) loan or the United States Department of Agriculture (USDA) loan, as little as zero down can be required.
Down payments are usually paid at closing. The settlement agent or closing attorney will combine the down payment total with the funds from the lender to pay the seller the purchase price.
Closing costs are expenses related to making a loan and closing the purchase.
This can include attorney fees, title fees, survey fees, transfer fees, transfer taxes, loan origination fees, appraisal fees, document preparation fees, and title insurance. The total closing costs can range between 2 to 5 percent of the purchase price and a buyer can negotiate with the seller to pay some or all these costs. Closing costs are due when you sign your final loan documents. You will most likely wire the funds to escrow that day, or bring a cashier’s check.
All these costs and fees are things you will want to be prepared for when purchasing a home for the first time. Keep track of what is due when and always pay on time.
Stonebridge Mortgage Group Offers Guidance On All Mortgage Matters
If you have more questions about the particulars of home buying, you can rely on Stonebridge Mortgage Group to help guide you through the home buying process. We help get you pre-approved for a mortgage and help with your real estate loans and other mortgage solutions, both residential and commercial. We serve the greater Portland area and are in Gresham, Oregon.