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Yes, It Is Possible To Buy A Home For Only $500 In Your Pocket

Updated: Sep 2, 2020

So how much money do you actually need to buy a new home? The truth is that it varies based on the type of loan, price of the home, negotiations, lender, and attorney used. For this article, we are going to look at the most common types of loans and the average price of a nice starter home ($150,000).



First Thing: Earnest Money


The initial cost of buying a new home doesn't happen until after you get an offer accepted on a home. That's right, you don't owe anything until you submit an offer on a home and the offer gets accepted by a seller. This first thing you need is called "Earnest Money".


Earnest Money is your security on your offer, basically offering the seller an amount of money if you default/back out of your offer. Your agent should write your offer in such a way that you do get this money back if you back out of the offer due to financing, inspections, or a number of contingencies. They should also have it so you can use this money towards closing costs, your down payment, or even refunded to you at closing. The amount is negotiable, however, for a $150,000 home, the average amount is only $500. Generally, you have 2 business days after the offer is accepted to give your agent the check to have the attorney hold.



Inspections


After the offer is accepted, you have the right to schedule inspections. All inspections are optional unless your lender has specific requirements. Once you get the inspection reports, you are able to negotiate and have the seller make necessary repairs. Payment for these are usually due upon completion of the inspection. As real estate professionals, there are 3 specifics that we highly recommend at minimal.



1. Termite Inspection: $75-$85


The first inspection we highly recommend is called a "CL-100", otherwise known as a termite inspection. Usually using a pest control service, the inspectors will come to the property and check the walls, foundation, and areas around the home. They will let you know if there are/ ever were termites or any other pests. They will check the wood on a crawlspace home for mold and pests. A large amount of lenders require this inspection. Most companies charge a free re-inspection if there is something wrong that needed to be repaired.


2. HVAC Inspection: $85-$100


The second type of inspection we highly recommend is an HVAC inspection. Here, the inspector will verify that the heating and air work effectively throughout the home. They will also check the unit outside and give full status on the wires, drains, coolant, pipes, and condition of the unit. After the inspection, the inspector can give you useful tips and information on your current unit and system.


3. General Home Inspection: $275-$350


Perhaps the most important of the 3 most recommended inspections is the general home inspection. A good home inspector will provide a detailed report of nearly everything in the home! They will check windows, outlets, lights, roof, doorbells, connections/wiring, and many other things throughout the home. They find issues as big as cracks in the foundation, and as small as a chip on the front door. Don't be alarmed when you get this report as their job is to find as much as they can.


An important note: this is a general home inspection. Their job is to identify if there is a problem somewhere, however you would need a specialist to determine what the problem is and how to fix it. I.E: the home inspector would read "Electrical socket in living room not working, recommend having an electrician diagnosis the problem"


4. Other Noteworthy Inspections

  • Roof

  • Chimney

  • Flooring (hardwood)

  • Porch/Balcony

  • Septic Tank

  • Lead Based Paint

  • Radon

  • Asbestos

  • Mold

  • Pool


Utility Set Up Fees


After inspections, the next thing that has costs is setting up utilities. Depending on the company, the fees are usually minimal and some companies don't cost anything other than a phone call. Some to keep in mind are: Water/Sewer, Electricity, Wi-Fi/Cable, Home Security, Home Insurance, etc. A safe bet is to assume between $25-$35 set up fee for each (Over-estimating).

Down Payment


The cost that scares most people out of buying a house is the down payment. This is the most varied cost and completely depends on the type of loan you get. 20 years ago, the average down payment cost was about 20% of the house. Nowadays, however, the banks understand people don't have tens of thousands of dollars to put down on a home. The most common types of loans on a $150,000 starter home are:


Conventional: 3% Minimal Down Payment: $4,500

or

FHA: 3.5% Down Payment: $5,250

or

USDA: 100% Financing: $0 Down Payment


See other posts for info and requirements on the types of loans

Closing Costs


The most unexpected cost when buying a home is the closing costs. These are not due until the closing table (usually 1 month after having your offer accepted). These costs include underwriting fees, origination fees, lender fees, title search fee, attorney fee, credit check fee, closing fee, home warranty, etc. The good thing about all of these fees is that you can actually negotiate the seller to pay some or all of these costs! These fees depend on who your lender is, who the attorney is, and the price of the home. In general, closing cost on a $150,000 house is between $4,500 and $5,000. It is common to have the seller cover about half of the cost, but depending on your offer, they can cover all of it as well. Some lenders will limit the amount you can ask to 3% ($4,500).


Keep in mind, your Earnest Money as described earlier can be used towards a down payment of to help cover closing costs.



Keller Mortgage is an exclusive lending service only available to Keller Williams agents that provides: ZERO Underwriting Fees, ZERO Lending Fees, ZERO Origination Fees AND Gives you $1,000 for you to use towards closing costs. See our article for more info.


Total Costs?


Earnest Money: $500

Inspections: $0 or about $450

Utility Set Up Fees: $0-$150

Down Payment: $0-$5,250

Closing:$0-$5,000


In Conclusion: The amount you need for buying a home can vary. In short, you can buy a home for as little as $500. A safe, and easier to close budget, is around $3,000-$7,000


So what are you waiting for? See if you qualify here https://www.jlcolumbia.com/see-if-you-qualify

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