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Many first-time homebuyers are understandably concerned by the prospect of high upfront costs of buying a home. They may worry they don’t have enough in savings, or that they’re going to get ripped off. At The Federal Savings Bank, we’re dedicated to helping guide prospective buyers through the homebuying process. Here are a few of the upfront costs of buying a house: 


1. Earnest Money (Often 1-2% of the Purchase Price)

When you make an offer on your new home, you will typically pay earnest money when the seller accepts that offer. This payment shows the seller you’re serious about buying their home – some refer to it as a “good faith deposit”. Unless the seller backs out, this payment usually can’t be refunded – but you can apply it towards your closing costs, or your down payment.


2. Down Payment (Between 2.5-20% of Home Purchase Price)

This is the upfront cost that most homebuyers are worried about. You may have heard you need to make a 20% down payment in order to obtain a home mortgage, but this isn’t the case. You may qualify for an FHA down payment assistance program, which may also help if you have a troubled credit history. If you served or are currently serving in the Armed Forces, you likely qualify for a low-cost VA mortgage. These often eliminate down payments entirely.

Be aware that if you make a lower down payment on your home, you will have a higher monthly payment than if you had put down 10 or 20%. You will also pay more in interest over the life of the loan. Still, if you do not want to drain your savings with a down payment, this can be an excellent option when shopping for a mortgage. The expertise of a loan officer can help you narrow down your choices.


3. Moving Expenses (Varies)

When you make the decision to search for a new home, start consolidating your belongings. Consider which items you want to bring into your next chapter, and which items you might be able to donate or discard. The less stuff you have, the less you’ll have to pay to move it. Moving expenses will obviously vary depending on how far you’re moving, and whether you hire professional movers.  

If you’re a member of the armed services, you might be eligible to have your relocation expenses covered by the VA*. Some civilian employers offer this as a perk as well.


4. Closing Costs (2-5% of Home Purchase Price)

Also called “settlement fees,” these are charged by the third parties associated with the purchase of your home: the real estate agents, the mortgage lender, and any attorney who might be representing you. The exact costs will vary from state to state. Other common closing cost fees include charges for your credit report, appraisal, and title insurance, as well as government recording fees.

Don’t fret about not having cash on hand to cover an additional 5% – many borrowers choose to bundle their closing costs for buying a home into their total loan amount.


5. Taxes & Insurance (Varies)

Many borrowers choose to escrow tax and homeowner’s insurance payments with their lender. As taxes and insurance rates fluctuate, your monthly payments may also fluctuate slightly if you choose to escrow.

Depending on the type of loan, the state, and county you buy in, you might be obligated to prepay some of the taxes and insurance on your new home before you begin making monthly escrow payments to the lender. (Note that this might be waived if you make a down payment.)


Where The Upfront Costs of Buying a Home Are Listed

Your lender will issue you a loan estimate that gives you an itemized list of the costs involved with buying your home. While we can’t tell you what it will cost you to move, one of our bankers can get you the best home you can afford. And they can provide the knowledge you need to make the right decision for you and your family. Give us a call at +1 877-788-2520 to get started.


Subject to credit approval. Terms and conditions may apply. Subject to VA eligibility requirements. Property insurance is required on all loans secured by property. *Eligibility requirements may apply. 

This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to you individual situation.