Buying a new home is such an exciting time! But if this is your first time buying or if it has been a while, the process and financial information can become pretty overwhelming. So if you are looking into buying a new home and have no idea what kind of money you will need in order to buy your dream home, then take a moment and read the information we have laid out for you here.
I highly recommend that even before starting the “shopping” process that you get pre-qualified for a loan. By getting pre-qualified we will know a better idea of what your home budget is and we will be prepared to put in a stronger offer with your pre-qualification letter, which is imperative in this competitive market in Bozeman and surrounding areas. Getting pre-qualified is simple and usually consists of a credit check and basic financial information. I recommend using Dan Aughney with Prime Lending or Courtney Adkins from Wells Fargo as your lender.
The first actual cost to you is your earnest money. Once you and the sellers have agreed on a contract then you will put down an amount of money to hold that contract. At closing your earnest money will go toward your down payment.
Depending on the type of loan you are receiving from your lender will depend on the amount of your down payment. Typically the downpayment of your home can vary from zero percent to 20 percent of the cost of the home purchase price. With a conventional loan, you are more likely to get a better interest rate and you are required to put at least 10 percent down. For any non-conventional loans like FHA, VA or USDA a down payment of zero to 10 percent of the home price is normal. However, the lender is insured by the government in case of buyer default on loans so your interest rates may be higher.
The down payment is a part of your closing costs but on top of that these are the costs you should be made aware of:
Loan Origination Fees: underwriting, processing, and application fees. These costs are typically about one percent of the home costs.
Appraisals: The city appraisal that guarantees that the house you are buying is worth the value that you are paying.
Surveying fees: These fees aren’t always customary but if you are buying a new property or new parcel a survey for property boundary lines may need to be customary.
Title Search and Title Insurance
Home Warranty: In some situations, especially new construction you can purchase additional home warranties with the purchase of your home.
Prepaid taxes and Insurance
Beyond the basic information that I have provided to you here, the HRDC in Bozeman does offer home buying classes that go into depth on the costs of purchasing a home and what to expect when you take on a home loan.
Let me know what questions you have and let’s get shopping on your new home or property!