Budgeting To Buy A Colorado Springs Home!
Buying a home in Colorado Springs can be an exciting time, especially if it is your first home. Calling one of our experienced Colorado Springs real estate agents is your first step in the home buying process. Our team can assist with all questions related to the buying process from start to finish. As a first time home buyer, understanding all the costs when buying a home can be confusing. As you budget for all the costs involved with buying a Colorado Springs home, here are some items you can't overlook.
Earnest money is not a fee but shows sellers you are ready and committed to buying a home. Our team can assist you in coming up with the right amount to put down as earnest money, but this amount will be put towards the closing cost or returned. Some people budget 1% to put into earnest money based off the amount they are willing to spend on a home.
Down PaymentIt is always best to have a 20% down payment when buying a home. However, some loans and programs offer incentives for home buyers to be able to purchase a home without having the full 20% down payment amount. When going through the prequalification process to buying your Colorado Springs home, you will want to find a lender you can ask questions to get the best option for you. After you are prequalified and you know the amount needed for the down payment, set that money aside for closing. Keep in mind with some loans if you don't have the full 20% to put down, the mortgage company will charge a property mortgage insurance (PMI) every month. This is additional money the borrow pays that does not go towards the principle of the home. Our real estate team and your lender can explain this fee but if you want to ensure you don't pay PMI, having the full 20% as a down payment will be the best option.
Closing CostsClosing costs as a first time buyer can be a bit confusing and costly if you are not prepared. Closing costs can vary depending on the lender and the type of loan. Our team works with reputable lenders in the Colorado Springs area, and we can recommend some top lenders to assist in your home buying process. The lender can go over all the costs they will have and what fees you will need at closing. As a general rule, we recommend you set aside 2% to 5% of the price of the home in closing costs.
As your Colorado Springs real estate agent, it is our job to help you negotiate the best terms when buying your home. Some of those terms can include getting the seller to pay all the closing costs or an amount agreed upon by both you as the buyer and the seller. Always have the closing costs set aside because it is not a guarantee the seller will pay all or any of the closing costs. You don't want to find your dream home and not be financially ready to close because you don't have enough saved for closing.
As mentioned above, closing costs and fees amounts can vary. When working with your lender, ask for a breakdown of all fees needed. Some lenders may be able to include closing costs in the loan, but you will want to discuss this option with the lender in advance. Here is a quick list of potential fees to budget:
- Title Insurance Fees
- Title Search
- Recording Fees
- Owner's Title Policy
- Mortgage Title Policy
- Escrow Fee
- Tax Certificates
- Document Fees
- Recording Fees
This is a sample list and a full list will need to be provided by your lender and title company. Closing costs and fees do vary and you can sometimes negotiate these fees with your lender. During your selection process for your lender, look at their closing costs as one of your deciding factors.
Other Costs to Budget
Make sure you know the costs for insurance on your new home and real estate taxes. You will want to have enough money saved to pay for your home owner's insurance right away. All lenders will require the home to have proof of insurance. Association dues may be due right away with the purchase of your home, so make sure you get all the association details before closing.
The entire process of buying a home may sound daunting but that is why our team is here to help! We will walk you through the process and make sure you understand all the details. We outlined everything above that can be included in buying a home but as we mentioned, talking to a lender is a great place to start. They will give you a detailed break down of what will be needed out of pocket at closing. Our team can also assist in the process as well. A good rule of thumb is to plan to have 3% to 5% for closing costs, a down payment, earnest money, and a little bit of money saved for additional expenses that could arise.