Frequently Asked Questions

5. How much money will I have to come up with
to buy a home?

Answer: The answer depends on a number of factors, such as the cost of the house and the type of mortgage you get. In general, there are three costs:

• earnest money - the deposit you give the seller when you make the offer.
• down payment - a percentage of the cost of the home that is paid when you settle.
• closing costs - the costs associated with processing the needed paper work to buy a house.

When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies. If you buy a HUD home, for example, your deposit generally will range from $500 - $2,000.

The larger the down payment, the lower your mortgage payments. Some types of loans require 10-20% of the purchase price. Many first-time homebuyers turn to the Federal Housing Administration (FHA) for help. FHA loans require only 3% down — and sometimes less.

Closing costs, which you will pay at settlement, average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for a loan, your lender will give you an estimate of the closing costs. If you decide to buy a HUD home, HUD may pay many of your closing costs.