How Much Cash Do I Need to Buy a Home besides the Down Payment and Closing Cost?

mortgageporterraiseIn addition to the down payment and standard closing cost associated to buying a home, additional funds may be required from the buyer prior to closing on a home. Here’s an example of what home buyers in the greater Seattle area should be prepared for.

Earnest Money Deposit. This is the deposit that is submitted with the purchase and sales agreement which is intended to show the seller that you are a “bona fide” buyer. The amount of the earnest money deposit can vary depending on the area the home is located in, type of property or market trends. There is no set rule that I’m aware of and this is something you need to discuss with your real estate broker before making an offer.  A rough estimate for earnest money would be around 1-3% of the sales price. How much money is used for earnest money deposit is critical because it potentially may wind up being awarded to the seller if for some reason the buyer does not perform with the real estate contract. How much earnest money you provide may show the seller how serious you are about your offer and could potentially impact whether or not they accept your offer.  The escrow closing company typically holds the earnest money funds during the transaction. At closing, the earnest money deposit is credited back to buyer and is typically applied towards the down payment and closing cost. Again, please talk to you real estate broker about earnest money and “how much” is enough for your specific offer.

Home Inspections. Home inspections are often not required by the lender all though some programs may require them (like Home Choice). A home inspection is intended to reveal potential defects of a home. This is typically done immediately after mutual acceptance of a purchase and sales agreement or may be done prior to making an offer on a home. The cost of an inspection can really vary depending on what the inspector charges, size and type of property. Plan on spending around $500 or more on the home inspection. Additional inspections may be appropriate depending on the subject property, such as sewer or roof, to name a few. Your real estate broker should have a good idea of what type of inspections may be useful for the specific property. As a home buyer,  you can select the home inspector – be aware that the least expensive is not always the best. You want someone who will do a thorough inspection and provide a detailed report.

Appraisal. Lenders require an appraisal on a home in order to determine the value based on what other similar homes have recently sold and closed for in the neighborhood. The appraisal fee varies depending on the type of property (such as single family dwelling, 2 – 4 plex, acreage, etc.) and the use of the property (for example, owner occupied or investment property). An owner occupied, single family home typically cost around $600 – $900. Many lenders will want a deposit upfront as this is a hard cost and if for some reason, the transaction does not close and the appraisal was completed, it needs to be paid for. I typically do not order the appraisal until I have been notified by the home buyer that they are satisfied with the home inspection and ready to proceed with the transaction. Home buyers cannot select the appraiser…and actually, neither can the Loan Officer! Regulations that have developed over the last few years restrain the loan officer from contacting the appraiser. The appraisal is ordered by the lender and the borrower will receive a copy of the appraisal. An appraisal deposit may also be required with a refinance transaction.

Again, this is just a quick list of things you may be paying for out of pocket before the closing of your transaction in addition to lender closing cost and the down payment. The fees can vary and this is just intended to provide a rough idea of what to anticipate.

If you are considering buying or refinancing a home located anywhere in Washington state, where I’m licensed to originate mortgages, I am happy to help you!

EDITORS NOTE: This post has been updated March 15, 2017 for more current appraisal cost. Appraisal fees (and all fees) are subject to change.


  1. Great information that home buyers can use.

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