There are some very common misconceptions when purchasing a home.  Now,if you are buying a home for the first time it can seem a little overwhelming and your are probably unsure of where to begin.  This is completely normal, don’t fret! Buying a home is probably the biggest financial decision you will make in your lifetime, so it should be a little overwhelming.  The emotions will run the gamut, and you’ll feel like you are on a rollercoaster, and that is ok! However, if you surround yourself with a strong team, your realtor and your lender, they will help guide you through the whole process.  Many people are turning to the web these days for recommendations, and are able to find strong professionals who actively educate consumers and have good web reputations. The nice thing about this, is like going to an unknown restaurant, you can get a feel of what to expect before making that call. Hopefully they advised you to first call a lender. It is hard to know what house to buy if you don’t know how much money you have. Make sense?

Now as a first time home buyer I’m sure you have many questions and many uncertainties regarding buying a home.  There seem to be a few common misconceptions that I get from first time home buyers.  One, is that the buyer pays the Realtor a commission.  This is not true.  You, as the buyer do not pay for your Realtors commission.  This is paid by the seller, it is part of the listing price, through their listing (to sell) agreement, the agents commissions written in to be paid out at closing from the seller’s proceeds. So when you are factoring costs of your down payment and funds needed to close there is no need to take into account the Realtors commission.

Another common misconception is that you don’t need your money in the bank until the day you close on the property.  Unfortunately this is not the case.  The funds you plan on using for your down payment/closing costs need to be in the bank preferably before you meet with a lender or at least shortly after.  I would advise that you have a minimum of $2000-3000 saved before meeting with a lender.  The reason for this is because you will be required to show that you have funds for your earnest money (deposit w/the contract). Earnest money can be on average around $1000-3000, and then money for your closing costs. Unless your are able to get seller paid concessions written into your contract, or have a sharp lender who discusses strategies to cover your closing costs in a competitive market where seller may not be willing to pay your closing costs.  You will also need to have funds for your inspection (est. $300-400) and an appraisal (est. $450).  These will be the costs you will need to pay up front and will not be part of the loan.  The good news is that the amount you put down for the earnest money will get credited back to you towards the money you have to bring to closing!  So this will lower your final amount due at closing.  I know this can be a little confusing but your lender will explain all of this to you.

Again, this is not a must, this is just a guide and some advice to get you started. There are always exceptions and other factors that can change the outcome/needs. However, overall I suggest  using this as a guide and again your lender will help advise you regarding your funds needed for closing.