What will I need to pay up front?
Some costs associated with buying a home show up before you start making regular mortgage payments. These include:
- Mortgage application fees
- Earnest money
- Down payment
- Closing costs
Mortgage application fees
Application fees include "origination" (or "service") fees, which can be flat fees, or can range from 1 to 2% of total purchase price. There are also appraisal, underwriting and credit reporting fees. These can sometimes be worked into the closing costs.
This is an initial deposit to be paid to the seller if your offer is accepted, to put weight behind your intention to buy. If yours is among multiple bids on a home, the earnest money you put down (also known as a "good faith deposit") may influence the seller's decision-making in your favor.
You can often get the best mortgage rates by paying a higher mortgage down payment. Down payments can range anywhere from 0% to 20% or more of the total cost of the home. 15% to 20% is ideal. Paying mortgage points up front can also help lower your payments and interest.