Calculate the Money You Need to Buy a Home

You spend a lot of cash when you buy a home. The down payment for your mortgage is only one expense. There are other outlays: appraisal, inspection, deposit, cash reserves and more. The costs add up.

"How much cash you'll need depends a lot on the size of your home purchase and how much you intend to finance," says Tim Ross, president and CEO of Ross Mortgage, based in Royal Oak, Mich.

Here are other expenses homebuyers incur (and have to save up for).

Earnest money deposit. Hopeful buyers need to be prepared with cash for a deposit to attach to their purchase offer. The amount of the deposit varies, depending on local custom, the amount of your down payment and size of your home purchase.

Ross says deposits can range from a flat fee of $500 to 1% or even up to 5% of the purchase price. An experienced Realtor can advise you on how much to offer.

Home inspection. "Every buyer should have a home inspection, usually within 10 to 15 days after the contract is approved," says Dyan Pithers, a sales associate with Coldwell Banker Residential Brokerage in Tampa, Fla. Costs vary; Pithers says the home inspection can set you back $325 or more. In's annual closing costs survey, pest inspections (which are separate from home inspections) averaged $119 in 2011.

If you are not on county or city water systems, a well inspection can cost $400, Pithers says.

Appraisal. In Bankrate's annual closing costs survey, the average appraisal cost a little more than $400 in 2011. Buyers sometimes pay for the appraisal when it takes place, and sometimes the fee is included in the closing costs paid on settlement day.

Down payment. "While some low- to moderate-income borrowers can find low down payment programs and zero down payment programs, in general, most people need at least 3.5% of the purchase price as a down payment on (a Federal Housing Administration) loan," says Michael Jablonski, executive vice president and retail production manager for BB&T Home Mortgage, based in Wilson, N.C.

Veterans Affairs loans, available to veterans and active-duty military families, have no down payment requirements.

"For conventional loans, a minimum down payment of 5% is acceptable for borrowers with excellent credit, but they will also have to pay private mortgage insurance," Ross says.

Some conventional loan and jumbo loan borrowers need to pay as much as 20% of the purchase price as a down payment.

Mortgage origination fees and title insurance. Loan origination fees vary from lender to lender, and title insurance varies from location to location, so there's no rule of thumb that applies everywhere.

"Sometimes buyers can negotiate to have the sellers cover their closing costs, but it's better to negotiate the home price first and then negotiate the closing cost assistance to make sure the sellers haven't just inflated their price to cover closing costs," Jablonski says.

Ross says buyers should be careful to review their good faith estimate as soon as they receive it, so they have an idea of how much their mortgage origination fees and title insurance will cost.

Moving costs. "How much moving costs depends a lot on how far you are moving," Pithers says. "If you are moving nearby and have friends and family to help, it can cost almost nothing. But a long-distance move of a 2,000-square-foot home, including having the packing done for you, could cost $5,000 to $7,000."

Ross says the average moving cost is likely to be less than $1,000, especially if you are moving nearby.

Necessary home purchases. If you are moving from an apartment to a single-family home, you may have to buy items such as a lawn mower, a snow shovel or window treatments.

"You need to be careful to really weigh each item against your budget," Jablonski says. "You don't have to start with a top-of-the-line lawn mower, for example. It's a great idea to do some research, and talk to people in the area where you are buying. See what they had to purchase right away, so you can budget for it."

Pithers says you may need to make deposits for utilities such as the water company or electric company, especially if you are moving from another locale.

Cash reserves. "Lenders typically want you to have at least two house payments, including principal, interest, taxes and insurance, in the bank after the closing," Ross says.

Jablonski says it's better to have six months' mortgage payments in savings after closing.