Purchasing your home; fees and options for home buyers in today's real estate market

                In spite of the doom and gloom mortgage headlines, there are still programs out there for first time buyers with little funds for a down payment.  Oregon, for example, has a program for first time buyers, who meet specified criteria, where the state will kick in the 3% for an FHA loan, allowing qualify buyers to purchase a home with little or no down.  Of course, there are certain guidelines on how long the buyers must stay in the property.
                Yet, even with such programs, the first time buyer needs to understand there are certain expenses they may need to pay up front, even when a lender tells them they can get into a property with no down payment. 
                There is the earnest deposit, to show good faith when a buyer is making an offer.  Although the earnest deposit normally goes towards the purchase price of the house (or is refunded back to the buyer at the close of escrow, if the funds aren’t needed), it is still upfront money the buyer must have before making an offer.  In Arizona, we normally deposit the earnest deposit with the Title Company, when the offer is accepted.  There it sits until the escrow closes, and is then dispersed by the Title Company.
                If the deal falls apart, the earnest deposit may go to the seller or be returned to the buyer, depending on why the escrow failed to close.
                How much is an earnest deposit?  Any amount the seller is willing to accept.
                Another fee the buyer may need to pay upfront, is the appraisal.  This may cost somewhere between $400 and $600.  The appraisal, required by the lender, lets the lender know if the property is worth what they are loaning on the property.  If the house fails to appraise, meaning the appraiser does not believe the property is worth enough for the loan the buyer is applying for, the seller might lower the price, or the buyer may agree to kick in more money towards the purchase.  If the deal falls apart, the buyer will still be responsible for paying for the appraisal.
                Another fee the buyer may need to pay upfront are any inspections on the property.  Once again, like an appraisal, even if the deal falls apart, and the buyer can not buy the property, the buyer (or whoever agreed to pay for the inspection or appraisal) will still be responsible for paying the bill.

                Buyers commonly request termite inspections (which in Arizona are normally under $100) or home inspections (in Arizona the inspectors must be licensed, and the inspections normally are under $300). There are other inspections a buyer might request, such as inspecting for mold or the roof.
                A first time home buyer needs to understand how long they have to inspect the property.  In Arizona, our standard contract gives the buyer ten days, and if during that time the buyer finds some defect they can’t live with, they can cancel the deal and get their earnest deposit back. Although the default is to ten days, a standard contract can be changed (with agreement of both buyer and seller) to specify a longer or shorter inspection period.
                During that inspection period we strongly advise the buyer to verify that they can obtain affordable insurance on the property.  In Arizona, our contract now requires the seller to provide a C.L.U.E. report on the property, which is basically the insurance history on the property.  For example, let’s say the property had a major water leak, and the insurance paid to make repairs.  It is always possible that since the leak and extensive repairs  is on the report, that when the next owner of the property tries to insure the property, they may  discover that the insurance company is unwilling to insure the property (or unwilling to insure at a reasonable rate), fearing it may now have mold.
                With all the fires currently going on in California, I would definitely check into the availability and cost of fire insurance before completing a purchase of a home.
                New buyers need to also consider the cost of turning on the utilities.  Some utility companies may require deposits.  If a new buyer has always been a renter, it is possible they have no credit history with some of the utility companies (such as water, which is usually included in rent).
                To the first time home buyer: make a check list of what expenses you may need to pay, before your property closes escrow. Understand that many of those expenses will need to be paid, even if you fail to complete the purchase.  And ask questions!  Often lenders and real estate agents assume you know more about the process than you do.