First-Time Homebuyer Guide
Nervous about buying a home? Our guide's got you covered!
Home Purchase Expenses
Don't Get Caught by Surprise!
Let’s look at the costs involved in buying your home. To get a clear picture of what’s within your reach, remember to factor in expenses beyond your down payment, such as:
- Closing costs
- Appraisal fees
- Home inspection fees
- Property taxes
- Homeowners insurance and mortgage insurance
- Homeowners association (HOA) dues
- Home maintenance, repairs, and utilities
Think of your monthly mortgage payment like paying rent, but with some added costs you might not see in a rental payment.
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A down payment is the amount of money you pay upfront towards the home’s purchase price instead of financing it through a mortgage.
While it is often recommended to have a down payment of 20%, most first-time homebuyers do not have the funds to pay such a large sum of money. First-time homebuyer programs may allow for a down payment as low as 1%.
Example: a 1% down payment1 on a home with a purchase price of $400,000 would be $4,000.
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The amount of interest you will pay each month is calculated based on the total amount of money you borrow to purchase your home and the interest rate of your loan.
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Closing costs are all the fees associated with the financing of your new home and will be paid by you when you sign your mortgage loan documents. These fees will vary, but they are typically about 2-5% of the purchase price of the home.
Closing costs can include, but are not limited to: application fee, credit check fee, origination and/or underwriting fees, title insurance, and title search fee. In some situations, appraisal fees and home inspection fees can be rolled into the closing costs. It is important to note that your closing costs do not include your down payment. In some cases, the home seller may be willing to cover some or all of your closing costs.
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An appraisal fee is the payment made to an appraiser to evaluate how much a home is worth (estimated property value). An appraisal fee tells you if the price you are paying for your home is more or less than the market value of the property. Appraisal fees can vary based on the size of the home, but an average single family home appraisal generally costs around $500.
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A home inspection fee is charged by a qualified home inspector for assessing the condition of a property, such as heating and cooling systems, plumbing, electrical work, water, sewage, as well as some fire and safety issues.
A home inspection helps the buyer determine the condition of a property and if there are any maintenance issues or potential costly repairs. The results of a home inspection can play a part in price negotiations and may force the seller to correct any issues with the home prior to the sale. Home inspection fees generally average between $300-500.
Determining how much home you can afford to buy can seem overwhelming. It is a good idea to make an appointment with an experienced loan officer to help you put together a monthly budget to determine your maximum home purchase price based on your monthly income, budget, and a monthly payment that is right for you. A real estate agent will typically require you to see a lender before they show you homes.
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- Utilities could become a larger portion of your budget if you are going from a small apartment to a house with more square footage.
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- Trash services are often included as part of your rent, but could become an added expense when you own your home and you pay directly to a trash removal company or to an HOA.
- First-Time Homebuyer Main Page
Nervous about buying a home? Our guide's got you covered!
- Is Buying A Home Right For You?
Knowing when to buy can be tricky. Learn what you need to think about before looking for your new home.
- Credit Guide
Good credit is crucial! Explore what to look for and what it mean on your credit report.
- Get Pre-Qualified
Getting pre-qualified is the first step. Learn how to do it and what it mean.
1Must be 18 and older to qualify. Down payments are examples only and do not include closing costs, prepaid interest, taxes and homeowners’ insurance. Down payment amount and mortgage loan amount will vary based on purchase price amount, credit score and income. Payment example on a loan amount of $355,410: 360 monthly payments of $2,601.68 at 8.042% APR which includes a down payment of 1%, purchase price $359,000. Estimated closing costs of $5,397.00. Pre-paid interest, taxes and homeowners’ insurance are not included in closing costs or payment example and can vary. An AACU rewards checking account is required with direct deposit to qualify. Membership requirements apply. Restrictions and requirements apply. Program subject to change. Equal Housing Lender.
Membership requirements apply. Restrictions and requirements apply. Equal Housing Lender. Air Academy Federal Credit Union: NMLS# 454287