Let us assume that you are paying $900 rent per month for a 1000 square ft apartment. This rent does not include any utilities such as water, electricity, and gas.<\/p>\n
You are interested in buying a home. The value of the home is $200,000 or $200K. This future home is 3 bedroom townhome or 3 bedroom condominium or may be a 3 bedroom single family home. This home has much better living space than the current apartment\/townhome for which you are paying rent. Do you know that you can live in this $200K home with the rent of $104.16 per month?<\/p>\n
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Let us assume that you (a potential home owner) are willing to come up with a down payment of 5% ($10,000) of the value of the home\u2019s current selling price ($200K), and you have a decent credit history.<\/p>\n
Your real home loan would be $200,000-$10,000 (5% down payment) =$190,000.<\/p>\n
Also the home buyer needs to come up with a closing cost. It is common for a variety of costs associated with the transaction (above and beyond the price of the property itself) to be incurred by either the buyer or the seller. These costs are typically paid at the closing, and are known as closing costs. Some lenders offer a promotion in which the entire closing cost is fully paid by the lender or a majority of the closing costs are paid by the lender.<\/p>\n
Let us assume that the closing cost at the time of closing is approximately 2% of the home loan, and you need to pay this cost out of your pocket at the time of closing. Hence the closing cost in this case is 2% of the $190,000 = $3800.<\/p>\n
Sometime, the home you are purchasing may have the dish washer, dryer, refrigerator, gas range ( in real estate language it is called All appliances conveyed, meaning that these appliances are included in the home purchase). But let us assume that none or very few appliance were conveyed. So let us add $3000 to buy a good quality appliance.<\/p>\n
Total you need to pay out of pocket at the time of closing will be as follows : <\/p>\n