september newsletter: what it really costs to buy, and why I haven’t done it yet [2018]

September 9, 2018

The insights for this post will prove if catchy titles are all they’re cracked up to be in the writing world.

Let’s jump right into why you probably clicked on this email. No, I have not bought a home for myself. I rent an apartment with a roommate in the city, and we’ve been in this place for two years. It was the only thing we could find that gave us each our own rooms and bathrooms, but also allowed for me to have a home office. Our place is affordable for the area; definitely much less than a mortgage on a three bedroom house would be in this location. For this season of life, my location is pretty important to me. I’m young, unmarried, self-employed, and I have no real reason to buy a house right now other than for investment purposes. Hopefully in a few years, my investment portfolio will take care of most of a down payment anyway.

Additionally, financing becomes trickier to obtain if you are a 1099 (self-employed) employee. Anyone on a W2 salary can be “qualified on their salary right away” whereas my lender refers to those with solely 1099 income as “the riskiest of individuals to underwrite,” and they need at least two years of employment history in that current position to even consider pre-approving a self-employed person.*

Thus, I feel it important to discuss what it actually costs to buy a house. I realize when I talk to my friends my age, they are under the impression that they need to save for a downpayment, which is true, but there’s actually many more thousands of dollars in expenses. You are also responsible for anything that breaks and all maintenance items.

Below are the bare minimum costs of purchasing a home. After your offer is accepted, therefore turning it into a contract, the period between that day (binding agreement date) and closing day is referred to as “under contract.” As you can see below, you’ll be out $800-1000 in expenses before you even close on the house, if no additional inspections need to be done. So, if something falls through last minute, you just spent quite a bit of money on a home you will never own. Therefore, it would be wise to only write offers for a home you really actually want to follow through with, unless some unforeseeable scenario comes into play, which happens quite often.

Under Contract

Inspection – $350-500 depending on sq ft and add-ons

Appraisal – $400


At The Closing Table

Loan Closing Costs – approximately 2 percent of sales price (example: sales price: $250,000. Loan closing costs = $5,000 cash due at closing.)

Down Payment – 3.5-20 percent of sales price, depending on type of loan and funds available

Settlement Fee – $450


So, if you have a sales price of $250,000, then you are looking at least $6,200 in additional funds needed to close. This is a big deal because that’s almost as much as your 3.5 percent down payment if you’re using an FHA loan.

You will know when it’s closer to time to buy, and I am happy to talk with you about it and shoot you straight. I am not here to sell you something; I’m here to provide a service. The last thing I want is for anyone to be in over their head with an investment they can’t take care of or afford. I want you to love coming home at the end of the day. I want you to be proud of your space and enjoy taking care of it because you were ready. Most importantly, I want you to be as informed as possible from the beginning.


Syd Phil