Are you financially prepared to purchase a home? You may or may not be aware of these upfront costs that you will have to pay before closing on your home. These costs can attribute to the loan amount and closing costs but they are usually paid upfront unless the lender or seller is offering buyer incentives. Even if you are planning on using down payment assistance or a 100% financed loan these are costs that you should be prepared for.
Due Diligence Fee and Earnest Money Deposit are both paid when the offer contract is executed.
Due Diligence Fee: Ranges from $200-$500. This is a fee given to the seller after you are under contract and it allows you to investigate the property while they take it off the market. This fee is not required but it does show the seller that you are willing to offer them something for the time that you will take investigating the property during the due diligence period. Any amount you put towards the due diligence fee will go towards your loan amount.
Earnest Money Deposit: Ranges from .5%-1% of the purchase price. This is your initial down payment and it is held until the closing date. Just like the due diligence fee this deposit goes towards the loan amount. If the buyer or seller decides not to go through with the sale before the close date, the earnest money deposit may be refunded back to the buyer.
The Inspection and Appraisal are both paid during the due diligence period, which is usually immediately after the contract is executed or within a few days of execution.
Inspection: Ranges from $250-$500 depending on the size of the home and the inspection company that you choose. There are various inspection services that you may need but every home will need a complete home inspection and a pest/termite inspection at the least. The complete home inspection is a thorough review of every area and functioning system of the house, noting the major issues or repairs needed.
Appraisal: Ranges from $300-$400 and will be paid to the lender, who then orders the appraisal. The appraisal will provide the value of the property. It is in your best interest that you know the value of the home you are purchasing. It is in your lenders best interest to know the value so that they can lend you the correct amount.
The average costs of a home in the Charlotte area is about $200,000, therefore based on these numbers your total upfront costs could be around $3,400 to purchase a $200,000 home.
~Qulia Bryant, Realtor