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New home buyers should be aware of several up-front costs that are part of buying a new home.  Some buyers will incur higher upfront costs than others. So, how much money should you need to close?  Exactly how much cash you will need to purchase your home depends on several factors that you can discuss with your real estate agent and mortgage lender.

So, what type of costs can you expect?

Loan Down payments

With a convention home mortgage,  a home buyer will be required to pay at least a 5% down payment.  Depending on the type of mortgage you are seeking, lenders may need more or less.  Some types of loans such as VA or USDA loans do not require a down payment.  Speak with your bank or financial representative to determine which types of mortgages may fit your needs.

Be sure to ask about down payment assistant programs that may be available to you.

Earnest Money

Buyers may be required to include a “good faith” deposit before making an offer on their new home.  This deposit is known as earnest money shows you are a serious buyer.  The amount of money you may need for earnest payments can vary widely but could be as high as $2,500.

Buyers should get the earnest money back if the deal does not close or applied to down payment or closing costs.  If you have questions about your earnest money deposit, your real estate agent can provide specific about your situation.


An appraisal is an integral part of the home buying process.  Appraisals help determine the fair market value and overall condition of your new home.  Costs can vary based on your location; the average price is between $300 and $400.  Remember, you will need to pay for appraisal upfront.

Home Inspection

While you are not required to get a home inspection, it is a valuable tool for home buyers and will ensure that you are aware of any defects that the appraisal did not uncover.

Buyers may use the results of a home inspection to negotiate a lower price to offset improvement expenses or to terminate the home purchase agreement.  The cost for a home inspection will vary depending on your location but can be as high as $500.  I always recommend a home inspection so that you have all the details you need to make an informed financial decision.

Closing Costs

The fees and costs for your loan origination and closing are called closing costs.  Closing costs are typically 2% to 5% of the loan amount. The actual price may vary by the type of mortgage you have and by your location. You should receive an estimation about of the closing costs for your mortgage during the pre-approval process.