In chess, it is the king that you need to protect in order to win your game, therefore every move has to be calculated. In real estate, cash is your most valuable asset.  Every penny has to be accounted for because IT MATTERS.  So here are the costs associated with the purchase of property. Here is a list of the expenses that you will encounter when you buy, assuming that you already have the downpayment money.

Earnest money is the money you put into escrow before the closing to indicate to the buyer that you are serious in purchasing the property.  If you deposit it with an individual, you may ask that he holds it, however as soon as you give the check to another person, it is implicit that it is funded.  This amount varies from broker to broker and from state to state.

Inspection money.  You will need to have an inspection done in order to determine whether there are hidden defects in the structure of the building. This money is necessary because an inspection report will allow you to renegotiate the price of the property, and it will tell you how much needs to be done. You will then have to decide whether you are willing to do all of those.

Appraisal money.  The property has to appraise for the price that you are willing to pay for it, preferably within a few thousand dollars of the asking price.  There is no huge advantage in having the property appraise for a lot more than what you would pay for it, until after you own it. First, a value that is way higher than the selling price raises flags with lenders, unless of course they are the ones who are selling it.

Property insurance money. In Louisiana, you have to bring proof of insurance purchase and it will say it will take into effect when the property is already in your name, but you do have to purchase it prior to closing.

Closing costs. Closing costs are broken down to attorneys fees, title search, title insurance, recording fees and mailing fees. You will need a very good attorney which you would if you had alredy assembled your team.  Your HUD statement will detail all of the costs of closing. This is also where you will see the cost of your loan as far as your mortgage broker fees. Different mortgage brokers charge different fees, depending on the type of the loan.  Some lenders will also require that you insure the title for the property in order for them to lend you the money.  If there are any questions on your HUD statement, feel free to bring it up on the table during closing. Your attorney has an obligation to tell you everything that is there.

If you pay for the property in cash you will still have to pay for everything other than the mortgage broker’s fee. I recommend that you still purchase the title insurance.