There are many costs involved with buying a house, some of which may be confusing. Today I want to go through some of them so that you better understand the process.


There are a range of costs associated with buying a home, but not everyone knows what they are. Today I’ll walk through the various expenses you should expect when you decide to purchase a home of your own and answer common questions we get from buyers.

First, is the down payment the same as the closing costs?

No, they aren’t the same. The down payment is the money that you need to put down in order to be able to buy a home; it has nothing to do with your settlement charges or closing costs.

For example: Suppose you are using an FHA loan, which has a 96.5% loan-to-value ratio, to finance your home purchase. If you are buying a house for $100,000, your down payment for that home is $3,500. You’re getting financing for 96.5% of that home’s cost.

Next, what are settlement charges?

Settlement charges are costs that you’ll have to pay out of pocket, for things like loan origination, appraisal, inspection, and escrow. These are separate fees from your down payment.

When you’re looking to buy a home, you need to look at both what you’ll need to put down and what it will cost you to get the loan needed to purchase it. There are some loan programs that will roll your closing costs into that; however, we have also successfully gotten closing cost help from the seller so that all you’d have to do is get the down payment. There are many ways to approach it.

About how much money should you spend on buying a home?

Buying a home is an exciting time, to be sure. Even if you’ve done all your research and have gotten pre-approved, however, there’s still more to do.

“You don’t want to be what is called “house poor.””

In addition to getting pre-approved, we also want to make sure that the transaction will follow through. Most lenders will look at what information that you’ve provided them and perhaps pull up your credit. If you want to be extra sure that you are as good as cash, then you should try to get some sort of loan commitment or underwriting approval.

To do this, submit all your documents to the lender for them to check out. They’ll treat your information as though you’re already buying a home and put it through the underwriting process, and that will tell you if you’re eligible or ineligible. In the event of your approval, there would be conditions that you’d need to meet, which you would know upfront. We do this for all our buyers so that they don’t end up buying a property and losing money for the inspection and appraisal—that alone could be over $1,000. We want to spare you that heartache.

Next, let’s discuss affordability.

You don’t want to be what is called “house poor.” This means you can’t afford everyday things because you’re putting everything into paying your house. To avoid becoming house poor, it’s a good idea to buy a little bit below your means. Budget for a home you can easily afford with consideration to all your other expenses, which means you should:

  • Know what your utilities will cost.
  • Know what homeowners insurance will cost.
  • Be aware of any HOA fees involved, if appropriate to your situation.
  • Consider other expenses, such as a child’s education.
  • Be aware of what sort of lifestyle you prefer to have, and what it costs to maintain it.

Also keep in mind that some of the costs of principle and interest are tax deductible. For more information about that, you should consult a tax professional.

For any questions you may have, please don’t hesitate to reach out to us. We are always here to help and guide you through the process, and we look forward to connecting with you.