Owning a home is a dream for many, it is a dream of mine as well. We have recently purchased a home and in this post, I will break down the real cost of closing down a house.
Disclaimer: We bought the house in a complete seller’s market with a low-interest rate during COVID so the numbers might vary.
Budget: 275K-350K
Requirements: 3 Bed 2 Bath with garage
Area: Dallas/FortWorth Metro
At the time of buying the house, we were renting a 1 bed 1 bath apartment for 1300$, so we want to move to a 2 bed apartment then we realized 2 bed apartment in a decent area cost around 1700$ per month with a garage.
So we started looking to buy a condo or a townhome which would have a monthly payment of 1700$ or less we did find condo/townhomes around the price range of 250K-350K K but the problem with those are they come with a hefty HOA of 300$-450$ every month which increases our monthly payment to around 2100$ a month. With that amount, we could easily find a single-family house with a 3 bed 2 bath going a little far from the center of the city.
Then we started looking for a single-family ranch houses within the range of 250K-350K, from the second week of the search we started bidding for the houses we like and we got none of them because at the time the houses are going at least 1%-2% above list price. After a couple of disappointments, we ended up getting the bid accepted for a house listed for 320K for which we placed a bid for 330K.
The Cost Breakdown
- Once our bid got accepted we put an escrow of $4000 and a $300 non-refundable fee if we backed out after the inspection.
- A home inspection is a must needed to find out any issues with the house which cost us $408
- Once the inspection is done everything looks good we went mortgage hunting and we found a lender who offered a 2.125 interest rate for a 15-year loan.
- The next is appraisal which costs $595 and will be done by the mortgage company which values the house and determine how much loan can they provide.
- The appraisal came back low than 330K which we placed the bid for, so we went back and forth to the price down to 322K (The appraisal came for 315K and we paid 7K out of pocket).
- We placed a down payment of 10% which is $31500.
- Then once the loan process is approved we started prepping for the closing date and closing amount.
- The closing amount included the 10% down payment which is $31500+$7000 (Un appraised amount) +$1000 Lender Fee + $500 Title Fee + 4300 Escrow (Insurance + 3 months interest + 3 months PMI + 3 months property tax) which came down to $44300 from which $4300 we paid in advance and we got some agent credit of 1% which is 3200$ so the final closing cost on the day of the closing came to $36800.
- So our final monthly cost came down to $2450 which is more than what we wanted to but we felt comfortable as $1770 of $2450 goes to the principal and we are paying a non-refundable amount of $680.
We thought thats all we need to spend to own a home then came to the real spend for home improvement and furniture.
Since we moved from a single bedroom apartment we didn’t have much furniture to fill in a 2000 sqft 3bed 2 bath ranch home. We almost have to buy everything starting with appliances (yes in texas they don’t leave a Refrigerator and washing machine)
- Refrigerator – $2000
- Washer + Dryer – $1000
- Home Decoration (curtains, lights, etc) – $500
- Moving -$600
- Dining Table – $420
- Mattress + bed – $2300
- Other Small Furniture – $500
So the final cost came down to $44300 + $2000 + $1000 + $500 + $600 + $420 + $2300 + $500 – $3200 (Realtor Credit) = $48420
The final cost to settle down in a new home is at least 5% more than the initial down payment. Do the real calculations before planning to own a home this does not include increased utility and regular maintenance bills which might be lower when you are renting an apartment.