Sacramento Real Estate Blog

Short answer for the median priced home in Sacramento County:  $8,150 up front, plus $1,835 per month.

Read on for the longer answer.

If you’re buying a home (in Sacramento or anywhere — even, God help you, Boise), naturally you want to know what it’s going to cost.

In this article, I’ve taken the median priced Sacramento home and worked out how much it would cost you to buy it, and when you’d be paying what.  We’re going to be buying a $255,000 home, which as of a few weeks ago was our median selling price.

What I’ve tried to do in this article is put together a scenario that is:

• Accurate given current rates and information.
• Doable.  By doable I mean you won’t have to pitch lowballs all day in the hope that someone will bat your home out of the park, or write an offer using a program that wouldn’t work on a bank foreclosure.  (Most of our buyers are interested in foreclosures because of the savings).  In other words, I’m presenting you with what I believe is a reasonable scenario for an offer that stands a fair chance of getting accepted and that will actually close.

I’ve also tried to estimate high on some of these costs such as inspections, which may be $25.00 or so cheaper in some instances than I’m quoting here.  In any case all numbers are estimates, so actual numbers may differ.

For our scenario, I’ve assumed you’re going to get the seller to pay  your closing costs, but you’re going to be bringing in a 3% deposit for an 30-year, fixed rate, FHA loan at 5.875%.  Actual rates and APRs vary, but that’s approximately what we’ve been seeing lately.*  The 3% can be gifted, so if you don’t have savings, you can purchase a home using that perennial favorite — the same program my wife and I used — PDPMAP.  (Parental Down Payment Mooching Assistance Program).

OK, so what will you need in the way of cash, and when?

When you write your offer:   First, you’ll usually need $1,000 for a good faith deposit.  This amount is not set by law, but rather by local tradition.  Some bank owned properties require a 1% deposit (i.e. $2,550), but unless that’s the case, I usually recommend a $1,000 deposit.  Whatever the amount, you’re going to write a check to the title company when you write your offer and give it to your Realtor® — we send a photocopy of the check to the listing agent when we submit your offer.  The check itself is held in the file uncashed until your offer is accepted, then it is cashed by the escrow company.  When you close escrow, it’s credited toward either your down payment or closing costs.  If you cancel the escrow during your inspection period, you get your deposit back. 

While you’re in escrow:  Once your offer is accepted, there are a few more costs, including an appraisal ($400), a pest inspection ($100), and a whole house inspection ($400).  For all of these, you’ll typically need a check up front, but the cost of the appraisal will be credited back to you in escrow.

Closing Escrow:  Remember our scenario. There are a number of closing costs, but we’ve asked the seller to pay those.  We need a 3% down payment, but we’re getting a credit for the good faith deposit and the appraisal that we’ve already paid.  Three per cent of $255,000 is $7,650, but with the $1,400 credit, our remaining cash to close is $6,250. 

In other words, between the point when you wrote your offer and when you got the keys to your house, your total cost was your $7,650 down payment plus your pest inspection and whole house, for a total of $8,150.

Monthly Payment:   

Because you’re financing a fairly high percentage of the cost of the home, your lender is going to want you to use an impound account to pay your tax and insurance.  You’ll also be paying principle and interest, plus MIP.  MIP, or Mortgage Insurance Premium, is the FHA equivalent of PMI — it’s insurance you pay because you’re borrowing a large percentage of the cost of your home.  (Once you’ve paid down your mortgage to 78%, the MIP is canceled).  Your total estimated monthly payment for all of these (Principle, Interest, Tax, Insurance, and MIP) will be $1,835.

So there’s how we got to our answer.  The median priced home in Sacramento costs $8,150 up front and $1,835 per month.

For those of you who would like a bit more detail on what we mean by closing costs, the following is a somewhat more detailed version of what we just went over:

Purchase Price		$255,000.00
Costs needed prior to close
Good Faith Deposit	$1,000.00
Whole House Inspection	$400.00
Pest Inspection	$100.00
FHA Appraisal	$400.00
Total needed prior to escrow		$1,900.00
Loan Related Charges
Tax Service Fee	$70.00
Wire Transfer Fee	$50.00
Processing Fee	$495.00
Underwriting Fee	$795.00
Flood certificate	$13.00
Total Loan Related Charges		$1,423.00
Title Related Charges
Recording Fee	$75.00
Escrow Fee	$328.75
Documentation Fee	$50.00
Notary	$60.00
Courier	$50.00
Email docs	$75.00
Alta Title Policy	$475.00
Total Title Related Charges		$1,113.75
Pre-paid Reserves
Tax (6 months)	$1,593.75
MIP (12 months)	$618.38
Hazard Insurance (12 months)	$865.73
Total Pre-paid Reserves		$3,077.86
Subtotal Closing Costs		$5,614.61
Credits to buyer for costs paid already
Credit ($1000 good faith deposit)	($1,000.00)
Credit (Appraisal fee)	($400.00)
Total credits to buyer		($1,400.00)
Total Closing Costs		$4,214.61
Closing Costs Credited by Seller		($4,214.61)
Total Closing Costs		$0.00
Paid Prior to escrow and not credited
Whole House plus Pest Inspection		$500.00
Down Payment (3% of purchase price)		$7,650.00
TOTAL CASH NEEDED BY BUYER		$8,150.00
(May be gift from relative etc.)

 

* This is an estimate from a Realtor — not an offer to lend.  We use independent lenders.  Please consult a lender for accurate APR information.

Related links:

Sacramento County Real Estate Market Review :: September, 2008
Sacramento County September Real Estate Price Changes By Area
Sacramento County Real Estate Price Changes By Area