Money Matters: Homebuying Costs, Paperwork, and the VA Loan

Today (gasp), we officially put in an offer on a home! The seller has until 8pm tomorrow to answer it, and I’ll be freaking out and will have high blood pressure until then. Needless to say, I’ve been doing some researching on this process in the last few days. Something I wanted to know was, “Exactly what kind of money will we have to pay out of pocket?” I found a few vague sites that were speaking finance talk that I didn’t understand. That didn’t help. So, now that we’ve gotten it all squared away ourselves, here’s some info that might help you out if you’re in that boat. Note: We used the VA loan, which isn’t a standard loan, so some requirements might be different (like the fact that we don’t have a down payment). We also had a 30-day closing timeline, so some time frames may differ. We asked for closing costs, too. I’ve also included a list of paperwork we needed. That would have been helpful. Instead, I ran around like a crazy person looking through filing cabinets and calling companies for records.

Basics:

Asking Price of Home: $180,000

VA Funding Fee (financed with price above): $3,870

Approximate Closing Costs: $5,715.13

What’s Due and When:

  • What: Deposit / Due: when writing offer
    • We wrote this check for $500 to our real estate agent’s company at the time we wrote the offer with her. Basically, this deposit ensures the buyer that you’re serious. If something falls through, you typically get this back. The only way you won’t is if you just randomly peace out on the seller (“I found a better house. I don’t want yours anymore”).
  • What: Appraisal Fee and Credit Report Cost / Due: in the 7 days after offer is accepted
    • For us, this totaled $430 ($400 appraisal and $30 credit report). This check was due to the lender by the 7th day after our offer was accepted. Not 7 business days. 7 days.
  • What: Home Inspection / Due: in the 10 days after offer is accepted
    • The home inspection has to take place in the 10 days after the offer is accepted. This amount all depends on the square footage of the home. Ours is 1,903 sq. ft. and the approximate inspection cost is $350.
  • What: Escrow or “Good Faith” Fund / Due: from time offer is accepted until closing
    • This was definitely the most confusing concept for me. This sum of money, 1% of the asking price ($1,800) for us, is “due” from the time your offer is accepted until you close. For our lender, we didn’t have to cut him a check for $1,800. Here’s the deal. The $500 deposit and $430 check to the lender count towards this (considering they prove that you really are invested in making this home yours). The inspection does not count towards this–in most cases. So, let’s subtract $930 from $1,800. We’ve got $870 left. Basically, all we had to do was provide bank statements showing we had this much money or more in our regular (checking/savings) bank accounts. And that’s it. I have read where some lenders do require a check in hand, but thankfully, it wasn’t ours! If you follow through with the deal, this money is credited back to you at closing.

Paperwork Needed for Lender

  • Lenders don’t like when family members gift you with money to cover the out of pocket expenses of home-buying. My dad sends me a monthly check to help with student loans, so I had to have him write a statement that it was not a gift and is for student loans. The repeated check from him on our bank statement was additional proof for this.
  • W2’s from the last 3 years
  • Federal tax returns from the last 3 years
  • DD 214 (for VA loan only)
  • Paystubs for most recent 30 days
  • Copy of Driver’s License of Gov’t ID
  • Home buyer education class
  • Proof that any collections are paid
  • Landlord information
  • Copy of last three months of bank statements
  • 2 examples of 12-month-long good payment history (credit cards, loans, phone bill, electric bill, insurance payment, etc.) – We used phone and insurance
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