Buying a home is a significant financial milestone, but it comes with a range of costs beyond just the listing price. To help you understand the financial commitments involved, this blog post will break down the various costs you'll encounter during the home buying process. From earnest money to closing costs, we'll cover everything you need to know before making that life-changing purchase.

1. Earnest Money: Committing to the Transaction

Earnest money, sometimes referred to as a good-faith deposit, is an upfront sum of money paid by the buyer to the seller to demonstrate their genuine interest in purchasing the property. This deposit signifies that the buyer is committed to the transaction. The exact amount is determined during the negotiation stage. It varies based on the market and the price of the home, but is usually around 1% of the purchase price.  Once the offer is accepted, the buyer usually has 3-5 business days to deposit earnest money at the Title Company. That money is then held in escrow until the deal is finalized and is used towards the purchase price. 

2. Home Inspection: Ensuring the Property's Condition

A home inspection is a crucial step to uncover any potential issues with the property. It's conducted by a licensed inspector who assesses the home's structural integrity, systems (electrical, plumbing, HVAC), and overall condition. While the cost varies by location and property size, expect to pay a few hundred dollars for this service. The insights gained from an inspection can influence your decision to proceed with the purchase, negotiate repairs, or even withdraw from the deal. If you're buying a rural property, additional inspections - like a well flow and septic test - might be added to the list of repairs. 

3. Appraisal: Determining Market Value

An appraisal is conducted by a professional appraiser to determine the market value of the property. Lenders require this step to ensure that the property's value justifies the loan amount. The cost of an appraisal ranges from a few hundred to around a thousand dollars. If the appraised value comes in lower than the agreed-upon purchase price, it can affect your financing options and negotiations with the seller. As a cash buyer, you don't have to have an appraisal; although, in some circumstances, it might be advised. Speak with your real estate agent about the pro's and con's on having the potential property appraised. 

4. Down Payment: Your Initial Investment

The down payment is a significant upfront payment made by the buyer toward the purchase price. It's a percentage of the home's price, typically ranging from 3% to 20% or more, depending on factors like the type of loan and your creditworthiness. A higher down payment often leads to better loan terms, including a potentially lower interest rate. It's important to carefully plan for this cost to ensure you're prepared for the initial financial commitment.

5. Closing Costs: Finalizing the Transaction

Closing costs encompass a range of fees associated with finalizing the home purchase. These costs can include lender fees, title insurance, attorney fees, property taxes, and more. Typically, closing costs amount to around 2-5% of the purchase price. It's essential to receive a Loan Estimate from your lender early in the process to understand the breakdown of these costs and budget accordingly.

Purchasing a home involves more than just the listing price. Understanding the various costs associated with the home buying process, from earnest money to closing costs, is essential for making informed decisions and planning your finances wisely. But you don't have to do it alone. An experienced and qualified real estate team will help you navigate these costs with confidence as you take this significant step toward homeownership.



Patrick and Polina have lived in Southern Oregon for more than a decade. They know – and love – this area and often refer to it as “America’s Best Kept Secret.” Whether you are looking to purchase your dream home, sell your existing property or build your real estate portfolio, this dynamic duo has the insight, creativity, and a clear understanding of the market to ensure your success. While Patrick and Polina work collaboratively throughout the process, you will see that each of them brings something unique and valuable to the team, giving you the competitive advantage in every scenario.