Knowing the upfront costs of buying a home is a smart way to be prepared for the biggest purchase of your life. Here are the costs associated with buying a home.

Things you need to pay for before closing

Earnest Money Deposit: around 1% of purchase price

Inspection: ranges from $350-$1,000 on average

Appraisal: ranges from $475-600 on average *varies based on complexity of property*

Things you need to pay for at closing:

Down Payment: minimum of 3-5% of purchase price

Closing Costs: 2-5% of the purchase price

Moving Costs: varies

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Now, for the detail-oriented folks... more detail!

Earnest Money Deposit 

After making an offer and coming to an agreement with the seller, a buyer is generally expected to pay around 1% of the purchase price as a good faith gesture to the seller. This earnest money is usually a check made out to your real estate agent's brokerage and held in the brokerage's escrow account until closing, when it is subtracted from the total amount you bring to closing. On a $425,000 home, the earnest money deposit would be around $4,250.


Easily one of the most nerve-wracking parts of a home purchase, a home inspection is a critical step in the process and is ultimately there to protect you, the buyer. A home inspector thoroughly checks your property for any damages or repairs that need to be made. If a problem is revealed, you may be able to negotiate with the seller to have repairs done before proceeding with the deal, or you may choose to opt out of the deal altogether as long as it's within your due diligence time period. The home inspection typically costs $350-$1,000, depending on the size of the home. You may also need to hire a specialized inspector -- a structural engineer, mold or radon inspector, plumbing inspector, termite inspector, roof inspector, fireplace/chimney inspector, or a pool/spa inspector -- which adds additional cost. 

A license is required to build a house; a real estate has to have a license to help a client buy or sell a house; but an inspector does not have to have a license to inspect a house. If you have a good real estate agent he or she can refer you to a reputable inspector who is certified by ASHI and ICC


To ensure that the price of your new home justifies the loan amount, your lender will have your home appraised by a 3rd party appraiser. This step confirms that your loan matches the market value of the home so you’re not paying more than what is fair. The appraisal will only occur after your offer has been accepted by the seller and you have begun to work with a lender to finance your new home. The cost of the appraisal is included in your total closing costs; however, the lender will ask you to pay for the appraisal before closing. Generally appraisal fees range between $475-$600, depending on the size and location of your property.

Down Payment

Most buyers are familiar with down payments. Experts advise you to have a minimum of 3-5% of the purchase price to account for the down payment. Your down payment can vary from between 3% of the purchase price (with an FHA-backed loan) to 20 percent (with a conventional loan). So, for a $425,000 home, you would need to put between $12,750 (3%) and $85,000 (20%) down. Down payments of greater than 20 percent are also an option and would lead, of course, to smaller mortgage payments and most likely, a lower interest rate.

The size of your down payment is the single largest factor that determines your loan options, as well as your mortgage interest rate. Your down payment is probably your biggest out-of-pocket expense. The second highest out-of-pocket costs are most likely closing costs. 

Closing Costs 

Speaking of closing costs, they typically range from 2 to 5% of the purchase price. Included in closing costs are fees that pay the people behind the scenes who get your loan done. For example, the closing attorney, title company, lender, and people who take care of administrative duties. The total closing costs should also include the required insurances and taxes. For our $425,000 example, closing costs would range from $8,500 to $21,250. 

Moving Costs

Be sure to keep some cash on hand for moving costs, which will vary based on how large a place you are moving from and how much stuff you have. The cost will also vary widely if you do a DIY move or hire a moving company. Purchasing boxes and other packing supplies, hiring packers and movers, renting a truck, and turning on utilities would fall under the category of moving costs.

Ready to buy a home but not sure where to start? Join us!

First Time Home Buyer Seminar - FREE at Keller Williams

Saturday, July 14th at 10am

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Ready to Buy Your First Home? Have More Questions? 

Call us today! 



*Blog writer is not a mortgage broker. Please consult a professional mortgage broker for your specific questions.*