The home buying process can be somewhat complicated. There are probably a hundred terms that buyers are hearing for the first time, such as DTI (debt to income ratio), earnest money deposit, escrow, etc. Sometimes we as real estate professionals throw around this jargon and forget to explain it in lay terms…or oftentimes the process, including the important milestones, might go unexplained as well. Therefore, I don’t want you to be surprised with these two up front, out-of-pocket expenses.

The first is earnest money. You can think of earnest money kind of like a deposit you might put down when buying something. It’s an amount of money you’ll give when your agent submits your offer or shortly after that lets the sellers know you are serious about your offer and that you have every intent of seeing this contract through. As far as how much your earnest money will be…it can be as little $500, but it really depends on the price of the house. Your real estate agent will help you determine the appropriate amount for the house that you’re buying.

The second fee you’ll likely be faced with is the property inspection. Don’t let a real estate agent or anyone else talk you out of getting an inspection. While it’s optional, it is a risk and unless you’re quite experienced buying and selling houses or with home improvement/construction, it might not be a risk you should take. The price for a home inspection usually starts around $300 and can go up to several hundred dollars. There are add on inspections you might want to consider as well. Testing for things like termites, radon, or mold is never a bad idea. Just know that you’ll pay for your inspection up front, directly to the inspection company.

These two costs, the earnest money and the home inspection are usually the only two things you’ll pay for upfront and out of pocket during the home buying process. Different regions across the US do things differently, so make sure and speak with your lender and your real estate agent about the process and the fees. You want to make sure you are confident and knowledgeable about this very important purchase as it might be one of the biggest purchases of your lifetime.