Home Buying – the Money Part

At the outset, let me say that I am not a loan officer or a mortgage specialist. I am a Realtor, and as such, I come across buyers who are bewildered by the money part of buying a home.

 

Terms like closing costs, down payment and earnest money fly around them, and they are totally foxed. Not to be gender-biased, but 50% of buyers (you know who I am talking about) just nod knowledgably, I might add, when talk veers around to financing the home. Then, after that show of familiarity and proficiency, it’s too late to ask what these terms actually mean.

 

So… here in a nutshell are terms, meanings and where they all fit in.

 

Term	How much	Type	When	What is it
Earnest Money	$500 - $2,000 depending on the price of the home	Personal Check (unless property is a foreclosed one)	Paid while writing an offer. The check is deposited when the offer becomes a contract	It shows you are serious about buying the property
Down Payment	·        $0 for VA & USDA loans ·        3 – 3.5% of sale price for FHA loans ·        5 – 20% for conventional loans	Certified check	At closing	Your ‘skin’ in the purchase. Deducted from the sale price. The amount depends on the type of loan.
Closing Costs	Depends on type of loan. Maybe 2 – 5% of sales price.	Certified check	At closing	Costs of getting the loan, title search and attorney fees. Can also include VA and other fees.
Mortgage	The actual amount of the loan (sale price minus down payment)	Your bank sends certified funds to seller	At closing	The amount you owe on the house.
PITI	-	Personal check	Every month	Principal, interest, tax and insurance that you pay your mortgage company

 

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