But how much do I have to pay out-of-pocket?

What are my up-front costs, and when are they paid?  

Earnest Money – Usually around 1% of the total sales price, however, it can be higher based on the seller's requirement. The earnest money can be returned to you in the case of termination IF the termination reason is covered in the contract. The earnest money may be considered part of your closing costs in the event of contract completion.  This fee is due within three (3) days of offer acceptance. (Usually required for VA loans as well).

Option Fee – an average of about $10/day per $100K of the sales price (ex. $300K = $30/day). Some sellers may require more or less.  Most option periods are between 3 to 10 days. This fee will never be returned to you, even in the event of a terminated contract.  You are purchasing time that is used even if you terminate before the end of the option period. This option fee may also be considered as part of your closing costs in the event of contract completion. This fee is due within three (3) days of offer acceptance. (Usually required for VA loans as well).

Inspector – The price will vary depending on the size of the home and what special inspections you have scheduled.  The price usually ranges from $300 -$1,000 (could be higher).  Special inspections could include inspections for a pool, termites, septic system, etc. You will pay this amount directly to the inspector YOU hire.  This is not part of the contract for purchasing the home. It is a private deal between you and an inspector and will not be considered in the purchase price. This fee is paid directly to the inspector. The payment time frame will be dependent on the inspection company’s policy.  (VA loans require a termite inspection).

How much money do I need to bring to closing?  

Down Payment – This will vary depending on your lender.  For a VA loan, usually 0% is required.  For all other loans, expect to pay between 3% and 20% (it can be higher if you wish).  The balance of your down payment will be required at closing.  (If less than 20%, expect to pay mortgage insurance).  

Closing Costs – Closing costs are usually estimated to be around 3% of the total price but could vary widely.  Closing costs include fees from your lender, fees from the title company, filing fees, pro-rated taxes, homeowners insurance, home warranty policy, and more.  The money paid for earnest money and option fees can be counted as part of this payment, so at closing, you may have less than the average 3% to pay.  

These costs are not all-inclusive and every purchase and loan are different.  There may be more fees or costs depending on what you, your lender, county, or insurance company require.  This is for information only to give the basics of out-of-pocket costs when purchasing a home to be better prepared when entering the market.  

For any questions about real estate, speak with your agent or a real estate attorney.  To get a more accurate picture of your financial costs, speak to your lender.