Guides Home Team
Written By Zach Hawke,
Edited By Sabrina Lopez
Editor’s Note: This is the second of two parts, with the first part originally published in the March 29, 2023 edition of The Post Newspaper.
Let’s take a closer look at the expenses you’ll be responsible for when purchasing your home.
Down Payment
The down payment is the portion of your home’s cost that you pay upfront. This figure is typically represented as a percentage of the purchase price, so your down payment depends on how much your home costs.
Different loan programs will have different down payment requirements. For instance, Department of Agriculture (USDA) and Department of Veterans Affairs (VA) loans require no down payment, but Federal Housing Administration (FHA) loans require at least 3.5% down.
Down payments for conventional mortgages depend on your lender’s policies. Some will allow you to put as little as 3% down for a conventional loan, whereas others may require 20%.
Closing Costs
Closing costs are fees paid directly to your lender or other entities, and they typically cost around 2–5% of the mortgage you take out.
While there are a number of fees involved in closing on a house, your mortgage lender should provide you with an estimate of each so you can budget accordingly.
Reserves
In addition to your down payment and closing costs, lenders may also require you to have reserves. This means you may have to prove that you will have additional cash after paying the down payment and closing costs.
The reason some lenders require proof of reserves is to ensure the buyer does not over-leverage their savings when purchasing a home.
Moving Costs
The last upfront cost of homeownership is the cost of moving. This can vary greatly based on your location and a number of other factors. According to the Moving and Storage Conference, the average cost of an in-state move for a two-bedroom home is about $2,300, while an interstate move of about 1,200 miles typically costs about $4,300 for the same home.
You will need to get quotes from moving companies to get an accurate estimate for your move.
Ongoing Costs of Homeownership
In addition to what you pay upfront for a home, there are a number of ongoing costs to factor into your monthly and yearly budgets.
Mortgage Payments
When you’re looking to purchase a home, it can be helpful to have an idea of how much you are able to put toward a monthly mortgage payment.
Your mortgage payment will depend on both the purchase price of your home and the interest rate from your lender. Mortgage calculators can help you estimate this cost.
Property Taxes
Each month, in addition to your mortgage payment, your lender may require you to put money in escrow for property taxes. If you do not pay these taxes through an escrow account, you may need to pay them in a lump sum.
The rate at which your property is taxed will vary depending on your state, county and city. Because property taxes are public records, they are displayed in property listings.
