It’s the start of the year. New year, new venture, or maybe a new home? If you are thinking of buying a home, especially if you are a first time home buyer, are you already familiar of the fees you are going to pay before you finally get the keys to your new home? If not, read on.
Many of the buyers who are not aware of the extra fees associated with the home purchase face shock on the closing table. If you are working with a buyer’s agent, he/she should tell you about these fees so you are prepared. The sale price of the homes for sale is not the only cost you will shoulder, there are many other fees associated with buying a real estate property.
Here’s a breakdown:
Fees involved in buying a home
- Down payment. This is the most common fee every home buyer is familiar with. This can range from 0% to 20%. Yes, we mean 0% because there are programs that make it possible for buyers to buy a home with no down payment. Talk to a mortgage lender and find out the best financing option available for you.
- Earnest Money. This is a proof to the seller that you are serious about buying the house. This will be applied to your down payment once the transaction is finalized. On average, expect a 1-2% of the total purchase price as earnest money.
- Closing Costs. Typically the closing cost makes up 2-5% of the purchase price of a house. The closing costs are fees charges by lenders and other parties associated to the purchase of the home and these fees are normally paid by the buyer though in other instances, the seller pays a portion of these costs.
Closing costs include the following:
- Credit report fee (Fee for running your credit report)
- Origination fee (Fee charged by the lender for processing the loan paperwork)
- Private Mortgage Insurance (If your downpayment is less than 20%, the lender may require you to buy this insurance)
- Initial interest (Coverage of the interest from the date you close until the end of the month)
- Discount points (Fee charged by the lender for giving you a lower interest rate)
- Title services and lender’s title insurance ( This is to protect the lender in case the title isn’t clean.)
- Property taxes /escrow (The lender collects tax from your as part of your monthly payment)
- Appraisal (This is to estimate the home’s value )
- Survey (This fee covers the cost of verifying the boundaries of the property.
- Homeowners Insurance (Lenders require insurance to protect you and their interest in case catastrophe strikes .)
- Government recording fees and taxes
- Buyer’s Attorney
- Home Inspection. Every inspector charge differently, it also depends on the size of the house, location, etc. The inspector will determine whether there are any problems that need to be addressed, this is to protect yourself from hidden or unknown defects before you buy. You may also need to hire an additional inspector who specializes in one of the following industries: HVAC, Radon, Termite, Mold, Well Water, Septic, Foundation, and Structural.
- Moving expenses. We know how expensive moving is so you also have to allot budget for this especially if you are moving across the country.