Our average sale price is around $185,000-$190,000 here in Fort Wayne.
I’m visiting one of the properties that we are rehabbing for one of our seller clients today. Learn more about our fix and list program here.
I thought it would be a great example because it’s an average house in this area. It’s a three bed, two full bath home, with 1,800 square feet.
First, Let’s Talk About Your Down Payment
Assuming you’re not paying cash for the home, you’re going to need to have some money set aside. Contrary to what some people believe, you don’t have to have 20% down to purchase a home. In fact, most people are putting down less than 20%, and some even go as little as 0% down. There are some first time buyer programs available throughout the country at different times. I’m not sure if any are available in Fort Wayne at this time, but there were more of them when the market was in favor towards the buyer, where it was harder to get financing.
We don’t see a lot of 0% down loans, but you can get a conventional loan for as little as 3% down. It will require you to have pretty decent credit. I would say the typical low down payment amount for a conventional loan would be 5% down, or 5% of the sale price. In a house like this for example, you’re looking at about $9,700 for your down payment if you put 5% down. If you put 20% down, you can avoid paying for PMI, or private mortgage insurance. If that’s the case, you’re looking at around $37,000 for your down payment on the purchase of an average Fort Wayne house.
You could also get an FHA loan, which requires a down payment for as little as 3.5% of the purchase price. You can get a USDA loan, or a VA loan, that requires 0% of a down payment. These are government insured loans, so sometimes they can make it a little more difficult to purchase a house, especially when you’re competing with other buyers. However, they are options for you. One thing to keep in mind if you’re going to be getting a USDA loan, is this loan is for rural properties, so it wouldn’t be applicable for a house in the city like this.
Next, Let’s Talk About Your Closing Costs
Your closing costs are the costs associated with getting your loan and then closing on the deal. For a house like this, your closing costs are going to be about $2,500. This includes your funding, or origination fee, which the lending institution charges as part of their fee structure. There are also going to be some miscellaneous closing fees that the title company will charge. This typically includes a broker transaction fee, which is around $200-$500 in our market. Traditionally, you’ll split the title closing fee 50/50 with the seller, and in this case it would be about $250.
So when you’re getting a loan in this price range, there’s around $2,500 of closing costs you have to think about. One thing to know is you can actually have the seller pay for your closing costs by negotiating. However, you can not negotiate for the seller to pay any part of your down payment. One caveat to that is, when you’re competing with other offers, typically the offers that are not asking the seller to pay for the closing costs are the ones that actually get the house.
When your offer gets accepted, you’re going to have to write a check for the earnest money. The earnest money sits in escrow until closing, and it gets applied to your down payment. So for a house in this price range, we’re typically seeing earnest money cost around $1,000. The more you give, the stronger your offer is. The less you give, the weaker your offer is. You can get your earnest money back for any reason, other than deciding you want a different house, which would leave the seller in a lurch.
Now It’s Time For Home Inspections
Shortly after you have an accepted offer, you’re going to want to schedule your home inspection. We recommend you have a general home inspection done, and this is by a traditional licensed home inspector. They charge you only by the size of the home, so for a house this size, it would cost around $400. You can also decide if you want to do more specialized inspections, like radon, water testing, mold, etc. Then of course, there are extra fees associated with that. I would budget for at least $400-$500. This cost is not included in the closing costs that we talked about earlier, it’s paid upfront at the time of the home inspection.
Next, Consider The Length of The Loan
The next thing you’re going to want to consider is the length of the loan. The vast majority of people get a 30 year mortgage, some people choose to get a 15 year mortgage, while others have done 10 years or less. From what I’ve seen in the last year or so with these low interest rates, the people who were considering a 15 year mortgage in order to pay less interest through the life of the loan, are now choosing a 30 year loan. They’re opting to make double payments each month, and if there’s ever a month where they want to put that money somewhere else, they can always fall back on their normal monthly payment. It’s going to be considerably less than a 15 year loan. This doesn’t affect your funds needed to close, or your down payment, so it’s something to consider as you secure your loan and finalize. You also want to consider your moving expenses. Depending on how far you’re moving and how much stuff you have, this cost varies greatly. You’re looking at anywhere from a few thousand dollars up to tens of thousands of dollars.
Just to Recap…
To purchase a home in this price range of around $185,000 in Fort Wayne, you’re looking at a total amount of $10,000-$15,000. Then you can secure a home and start enjoying these great interest rates and appreciation that we have going on right now. If there’s anything I can do to help you, please reach out to me. Nothing makes me more excited than when I get communication from someone who’s thinking about moving into my great city!