This is also known as my speech, "What Money You Need...and When You Need It!"

Don't you hate it when you go to buy something, and it is advertised at a certain price, but then when you go to pay, you find out there's more?  For example, buying a computer.  You can't just buy a computer -- you have to buy anti-virus software, a warrantly perhaps, and there's even a fee for them to take the "junk" off your new computer that shouldn't have been there in the first place!  :-)

When it comes to buying a home, I would like to take away that fear for you.  I want you to know up front what money you will need, and when you will need it.

In most cases, you will need to write a check four times when you buy a home.

1. Earnest Money

2. Home Inspection

3. Home-owner's Insurance

4. Balance at closing

Let me explain these in detail.

1. Earnest Money.  Earnest money is like a depsit.  Unlike putting a deposit down on an apartment, however, where you get your deposit back when you move out, you get your earnest money deposit on a home purchase back when you move in.  Here's how it works:  When you write an offer on a home, and your offer is accepted, your buyer agent gives your earnest money check to the seller's real estate company.  The seller's real estate company then puts your check into their "trust account".  That check is then cashed, but by law they cannot do anything with your money except leave it in their trust account.  At closing, your earnest money is credited to your final costs.  A typical earnest money check in the Des Moines Realty market is $500.00, though it can be more or less depending on the situation and the price of the home you are buying.  It really doesn't matter how much it is, though, because it's not extra money to you.  You get it all back at the closing.

2. Home Inspection.  This is a totally optional fee, but I think everyone should get a home inspection.  Most home inspectors in the Des Moines Realty market charge anywhere from $200 to $250.  One of the home inspectors that we recommend only charges $195.  The idea behind a home inspection is to know that you are buying a good home with no major problems.  If there are problems, and your buyer's agent wrote your offer subject to a home inspection, then you and your agent can negotiate with the seller to fix the problems.  If the seller will not work with you on this, you then have the option of not buying the home.  As I mentioned, this is an optional cost, but I strongly feel that every home buyer -- regardless of price range and age of the home they are buying -- should hire a home inspector.

3. Home-Owner's Insurance.  Everyone has to have home-owner's insurance, of course.  But people are sometimes confused about when and how they are paying for it.  Typically no later than a week or so before closing, you will want to have purchased home-owner's insurance.  We will remind you when to do this.  You can shop around and choose any company you like.  Most home-owner's insurance companies will want you to pre-pay the first 12 months.  Rates vary, but $600 a year is probably a good average.  The confusing part is that when you make your mortgage payments on your new home, part of that payment is also going to home-owner's insurance (if you are like most people and have an escrow account).  The reason is simple: When you make your mortgage payment, your bank is setting aside the insurance portion of your payment to pay for the next 12 months.  So once you pay your for your insurance the first time, you really never have to think about it again (unless you need to make a claim, or switch insurance companies).

4. Balance At Closing.  That sounds pretty vague, doesn't it?  But that's because this figure really depends on what kind of home loan you are getting, and whether your buyer's agent wrote for the seller to pay your closing costs in the offer (which we usually do).  For example, if you are getting a zero down loan (also known as 100% financing) and your agent had the seller pay all of your closing costs, you might have to bring just a couple of hundred dollars to closing -- or no money at all.  Or, as is often the case with our clients, you actually receive a check back at closing!  Or, you could be putting 10% or 20% down, and paying your own closing costs.  It just depends on your situation.  Of course, regardless of what kind of home loan you are getting, your earnest money deposit is credited back to you at this time.

So, to sum up, here are the checks you will usually need to write when buying a home in the Des Moines market:

1. Earnest money, usually $500

2. Home inspection, $200 to $250 (optional)

3. Home-owner's insurance, average $600

4. Balance at closing, anywhere from you receiving money back to thousands of dollars, depending on the kind of home loan you have.

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