If you’re considering buying a home in El Paso, it’s important to know what to budget for. Even if you’re a VA buyer, you should plan to have some money on hand when buying.
Here are a few costs to budget for:
Down Payment: 0-20% of sales price
Saving for a down payment is likely top of mind as you set out to buy a home. While each situation is different, there’s a common misconception that putting 20% down toward your purchase is required. Unless it’s specified by your loan type or lender, it’s typically not required to put 20% down. In fact, if you’re using a VA loan (as most of our clients use) you do not have to put any down payment down!
To better understand your options, it’s important to go over the various loan types, down payment assistance programs, and what each one requires. I’m happy to connect you to a trusted loan officer who can advise you based on your personal financial situation.
Closing Costs: 2-3% of the mortgage
Though you may not need to make a down payment if you’re using a VA loan, you do want to make sure you budget for closing costs, which are a collection of fees you pay when finalizing a real estate transaction, whether you’re refinancing a mortgage or buying a new home. In El Paso, you should expect these costs to amount to 2 to 3% of the mortgage. The closing costs will vary by lender, so it’s important to speak with your loan officer to understand what their closing costs will be.
In December 2022 here in El Paso, we are beginning to see some situations where the sellers are willing to pay for buyer closing costs, but right now it is best to be prepared to cover your own closing costs to be on the safe side. Who pays for buyer closing costs and the amount is negotiable between buyer and seller.
With that said, if paying your own closing costs is out of the question, work with your agent to see what your options might be. We may decide to go with certain strategies like looking into new construction (you can often get all of your closing costs paid for), certain programs through your lender, and pursuing properties that have been sitting on the market for a while.
Earnest Money Deposit: $1000-2000
You should also start saving for an earnest money deposit (EMD). An EMD is money you pay as a show of good faith when you make an offer on a house. In El Paso, depending on the price of the home, that EMD is usually $1000-2000.
This deposit works like a credit. It’s not an added expense – it’s paying a portion of your costs upfront. You’re using some of the money you already saved for your purchase to show the seller you’re committed and serious about their house. Assuming all goes well with the transaction, the earnest money funds go toward the down payment and closing costs.
Keep in mind, an EMD isn’t required, but it’s not likely in El Paso that your offer will be accepted without one. The EMD amount is negotiable between buyer and seller.
Option Money: $100-200
In the state of Texas, we have what is called an “option period”. This is a period during which you, as a buyer, can back out of the contract for ANY REASON AT ALL without losing your earnest money. But the option period is something we pay for. The going rate in December 2022 in El Paso for option periods is $100-200. The amount is negotiable between buyer and seller. If you don’t want an option period, that’s fine—you don’t have to have one, but we highly recommend paying for one.
Private Inspection Fee: $300-350
Though a private inspection is not required, we highly recommend having one whether you are going the re-sale or new construction route. An inspection helps you to understand what’s going on in the house that isn’t as visible to the naked eye. A private inspection in El Paso in December 2022 is usually somewhere between $300-350. You can also pay to have the inspector go out for a “re-inspection” and that is usually about $75.
Termite Inspection Fee: $80
If you are using a VA loan, a termite inspection is required and you should allocate about $80 for that inspection. If you are going the new construction route, that requirement is usually waived by the lender because the wood is pre-treated.
Appraisal Fee- $400-1000
In most cases, if you are financing the purchase of your home, your lender will require an appraisal. An appraisal is a fair market valuation of property. The cost for the appraisal can range between $400-1000. If you are using a VA loan, the current cost as mandated by the VA is $800. This is non-negotiable. Depending on the lender, you may have to pay for the appraisal at the time it is ordered while other lenders will allow it to be paid at closing.
Realtor- $0
In almost cases, the buyer’s agent commission is paid for by the seller. If you’re a VA of FHA buyer, you cannot pay agent commissions at all. You should have representation, EVEN if you’re buying new construction.
Bottom Line
Budgeting for your home purchase doesn’t have to be intimidating. Get with us so you’ll have an expert on your side to answer any questions you have along the way.
