The 4 Costs Involved in Purchasing a Home

McKenzie Walsh
​USU Extension Housing Expert

In the process of purchasing a home, there are more expenses to be prepared for beyond the cost of the home itself. Tracking your expenses and budgeting your money to save for these costs is important. Researching areas you would like to live and homes that you are interested in buying will help you determine how much you need to save. Below are four costs to consider in addition to the purchase price. 

1. Down Payment- A down payment is an initial large payment towards the purchase of a home. 20% of a down payment is recommended but not required to be qualified for most mortgages.  
2. Earnest Money- The money given to a seller at the time of entering a contract to show the seriousness of buying the home. Earnest money can be lost if the purchase contract is not kept. A common amount for earnest money is 1-3% of the purchase price of the home. 
3. Mortgage Insurance- Some mortgage loans, such as conventional and FHA, charge mortgage insurance when down payments are less than 20%. Mortgage insurance protects the lender in case of default. The insurance can be removed by request or by refinancing once the mortgage reaches a loan to value of 80%. This type of insurance could have up-front fees in addition to its monthly charge. 
4. Closing costs- There are costs associated with closing on the home. Closing costs can vary from lender to lender but are usually determined by the loan amount, mortgage type and are often between 1-5% of the loan amount.