How Much Does it Cost to Buy a House?


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One of the things that first time home buyers don’t always understand is what actual costs are associated with buying a home.  I’m not talking about purchase price, I’m talking about out-of-pocket expenses that you need to be prepared for in order to be able to buy a home on the spot.  With how quickly the market is moving right now (due to an inventory shortage), I recently had a client that lost out on 3 different homes they liked because they didn’t act fast enough.  I have said it before and I will say it again: There are tons of buyers, and the competition is stiff.  You have to be ready to buy at the instant you see the home you love.  Part of being ready to buy is understanding the process (and having someone to walk you through it with proper timing, which is one reason why you need a Realtor).  If you understand the process, you can be prepared for what is to come.  My goal is to educate you on ALL costs that COULD be associated with buying a home.  There are certainly different loans and incentives that offer ways to reduce these costs.  I want to make you aware of what you can expect to pay, and if a few of these costs get cut along the way, you’ll be that much happier at closing.

Earnest Money Deposit –  In order to write an offer on a property, you will want money saved up for an earnest money deposit.  The Earnest money deposit check tells the seller of the home that you are serious about buying their property.  Although there is no standard dollar amount for this, we will use $1000 for our purposes.  *I feel that this is a good number if you plan on buying a home between $75,000 and $275,000 unless there are other restrictions (another reason to have a good Realtor).  If you plan on buying a home that is $300,000 and higher, you might use a percentage (.5% to 1% is a good guesstimate).  The earnest money deposit is subtracted from the total amount of money that the buyer owes on the final settlement statement when you close on the home.

Home Inspection You will most definitely want a home inspection performed to determine if there are any issues that need to be addressed in the home.  A general home inspection combined with a termite inspection will run anywhere from $300 – $500 ish.  There are also extra inspections that you can add like testing for radon gas, mold, land surveys etc.

Appraisal – Your lender will order the appraisal.  An appraisal is an opinion of value.  The bank wants to make sure that the home you are buying is worth the money they are lending you.  I have heard of very few occasions where the appraisal has been paid for by the lender (different loan programs etc.), but I would be prepared to pay this fee out of pocket.  $350-$500 ish.

Closing Costs – If you really want to be on top of the game, be prepared to pay your own closing costs.  Yes, closing costs can be and sometimes are paid for by the seller if the seller agrees, but your offer is a lot stronger if it doesn’t include seller-paid closing costs.  Count on $1000-$3500.  If your closing costs are more than $5,000, you should find another lender.

Down Payment – It could be as low as 3% of the purchase price of the home, up to… as high as you want.

So let’s generically breakdown a $150,000 home purchase:

  • Earnest money – $1,000
  • Home inspection, termite, and radon test – $450
  • Appraisal – $300
  • Closing Costs – $3,000
  • Down Payment (3.5%) – $5,250
  • TOTAL – $10,000 (remember that $6,250 of this $10,000 gets deducted from the sale price as earnest money and down payment)

Since a home is most likely the most expensive thing you will ever buy, you need an adviser.  If you have questions about real estate buying or selling, or if you are ready to start the process, I would love to speak with you – 502.509.9278

Just want to look around a bit? View Louisville Homes for Sale

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