We’re all aware that buying a home requires a pretty sizable cash outlay for the down payment and at least some of the closing costs. There are, however, many more costs involved in buying a home, including earnest money deposit, inspections, appraisals, and moving expenses. A lot of it, of course, depends on the size of the home and the amount you finance. So before taking that big-money plunge, you should probably spend some time estimating costs when buying a home in Los Angeles.
1. Earnest Money Deposit
When you make an offer on a home, you need to be prepared to put up an earnest money deposit. The purpose of this deposit is to show that you’re a serious buyer, and, as a result, the seller will halt other deals. The amount of the earnest money deposit depends on the sale price, generally somewhere between 1% and 5%.
In the excitement of buying a new home, people often overlook inspection expenses in estimating the costs when buying a home in Los Angeles. But if you’re financing with a lender, it’s a cost you just can’t get around. Typically, the inspection takes place within 10 to 15 days of the contract’s approval. A thorough home inspection can set you back over $300.
If you’re not paying cash, here’s another unavoidable cost because your lender will demand an appraisal. Occasionally, sellers will pay some or all of the appraisal fee, but that’s not something you can count on. And often the cost of the appraisal is figured into the closing costs – it may be hidden this way, but you still have to pay it.Typically, an appraisal will cost you at least $400+.
4. Closing Costs
And, of course, you have to factor in closing costs. While it’s true that sellers, in rare instances, may offer to pay the closing costs to make the sale more attractive, more often it’s the case that they’ll pay only a portion if any at all.
These closing costs are third-party and lender fees that you pay when the transaction is finalized and they can include fees for wire transfer, survey, underwriting and origination, credit reporting, document preparation, title insurance, and recording. Closing costs generally run in the range of 2% to 4% of the sale price – a pretty substantial amount, actually.
5. Moving Expenses
When estimating the costs when buying a home in Los Angeles, many people neglect to figure in moving expenses because they aren’t part of the actual purchase. Still, it’s something you’ll have to pay even if you’re moving to a new home within the same neighborhood.
If you don’t have a truck and/or a trailer and some energetic help, you’ll probably have to hire a professional mover, especially if it’s a long-distance move. If the move isn’t all that far, say, within 20 miles or so, you’re looking at around $1,000. If you’re relocating across the country, it could run you as much as $5,000 or more.
So if you’re moving to another state, it’s probably a good idea to sell as many of your larger possessions as is feasible. In some cases, for a truly long-distance move, it can be cheaper to buy new furniture for your new home than to pay for moving your current furniture.
Obviously, in estimating the costs when buying a home in Los Angeles, you need to look far beyond the down payment and closing costs. There are, however, alternative home-buying options that may help you pay a lot less up front.