Purchasing a new home is an exciting experience, filled with significant milestones and financial considerations. Before embarking on this venture, it’s essential to understand the nuances of deposits, down payments, and closing costs to make informed and confident decisions about your new home. To help, we break down these three terms below to make homebuying easier than ever.
When you purchase a home with Empire, your journey begins with a deposit, specifically the earnest money deposit. This initial deposit is required to secure the contract and is calculated as a percentage of the lot premium, base price of the house, and structural items. If you’re customizing your home from the ground up, additional deposit funds — a percentage of your Design Studio selections — is required after completing the design phase.
Our sales consultants can provide you with an estimated breakdown of the deposit and outline when they’re due. It’s important to note that 100% of the deposit provided at the contract and design stages is credited to you at closing, effectively reducing your down payment for the mortgage.
The mortgage down payment is a significant financial aspect of the homebuying process, representing your commitment to the investment. Typically based on the loan program, the down payment is paid at the time of closing. It can range from as low as 3% to as high as 20%, providing you with instant equity in your new home.
The deposit funds you’ve given to us are factored into the down payment calculation. The more you contribute upfront, the less you need to finance, resulting in lower monthly mortgage payments.
Closing costs are the final piece of the puzzle, involving a lump sum of money paid by the buyer at the scheduled closing date. This sum comprises the down payment plus the closing costs, minus any deposit or design funds given to us, and may also include closing cost incentives we offer.
To estimate your closing costs, plan for approximately 2% to 2.5% of the final purchase price of the home. Empire’s preferred lenders can provide accurate estimates for all mortgage-related costs, ensuring you’re well-prepared for this crucial step.
Example: You’re purchasing an Empire home with a final price of $500,000. Planning to make a 10% ($50,000) down payment, you’ve already paid a $23,000 deposit during the contract and design phases. Closing costs amount to $12,500, with Empire providing a $3,000* seller credit to help cover some of these costs.
In this scenario, your total amount due at closing would be roughly $36,500, calculated as follows: $50,000 (down payment) + $12,500 (closing costs) – $23,000 (deposit/design money) – $3,000 (Empire’s closing cost incentive).
*Amount varies by community.
Next, learn how to prepare for Empire’s new home releases, and discover why new homes are still the smarter long-term choice.