Home Buying Costs: Get to Know the Cost of Buying a Home
One of the most overlooked factors in the process of buying a home for
many people are the costs that traditionally accompany that purchase.
Far too frequently many people overlook, or are completely unaware of
the various home buying costs they will need to cover in connection with
the purchase of their new home. As a result, they may find themselves
unable to complete the transaction or at the very least hard pressed to
come up with the required cash. By taking the time to acquaint yourself
with these home buying costs before you begin the home buying process
you can make sure you are educated and prepared.
Appraisal Costs - These are the costs that are typically paid in order
to obtain a fair market value of a home. In order for the mortgage
company to approve the loan, an appraisal must be performed. These fees
can also be important for tax purposes. Average: $225-$450
Credit Report Costs - Before your lender can make a decision on your
loan he or she will want to review and verify your credit report. This
costs money and the fees are usually charged to you in connection with
your loan. Average: $15-$30
Document Preparation Costs -These are the home buying costs that are
paid to your attorney, broker or lender for the preparation of documents.
Down Payment - This is the amount of money in cash that you pay at the
closing toward the purchase of your home. The amount of this fee can
vary widely depending on the type of mortgage you obtain.
Escrow Fees - You may be required to pay money into escrow either before
the closing or while you are paying down your mortgage; depending on
your lender and the terms of your contract with the seller. Escrow fees
are associated with the provision of this service.
Home Inspection Costs - Your lender may require this to make sure that
the home is in good working order. This can also serve to protect you
should there be anything wrong with the house that would persuade you to
back out of the deal before buying the house. Average: $225 to $450
Homeowner's Insurance Costs -Generally, most lenders require insurance
on the property before you can actually take possession. These fees vary
according to the size of your home and the insurance company. Average:
$300 and up.
Legal Fees - These are the home buying fees you may pay in connection
with any consultation you receive from an attorney regarding your
Notary Public Charge - In order to verify your identity you will need a
Pest Inspection Fee - While this won't necessarily be required if you
are purchasing a newer home, if you are buying an older home you will
need a pest inspection.
Points or Origination Fees - In order to lower the interest rate on your
mortgage you may wish to buy what are known as points. Each point
represents one percent of the mortgage value. The more points you pay,
the lower your interest rate should be. In some cases you may be able to
persuade the seller to pay the points for you. Average: 0-2% of the
Private Mortgage Insurance (PMI) - This insurance may be required if the
down payment you are paying is less than 20% of the value of your home.
Depending on circumstances you may need to pay up to as much as one year
of premium at the closing.
Property Taxes - Depending on your situation, you may owe some property
taxes instantaneously when you purchase your home. This might occur if the
seller of the property has paid them upfront covering the period of time in which
you will actually own the property. For example, if your were closing on
your home purchase in July, you would be required to reimburse the
Seller for August and September taxes that were paid by the seller as
part of a quarterly set of taxes that were paid at the beginning of
State Recording Fees - These fees depend on state requirements but may
be charged in order to record the transaction. Average: $50 to $150
Survey Costs - A survey may be required in order to determine the exact
boundaries of the property. You won't need to pay for this fee if an
existing survey can be used. Average: $150 to $400
Tax Service Fees - This service is to ensure that your real estate taxes
Title Insurance - This insurance covers you if it turns out that the
home seller did not actually own the property you bought. Average: $175-$875
Underwriting Fee - Underwriting is the process that is used by lenders
in order to evaluate your creditworthiness and income as well as to
determine the value and quality of the property in order to make a
decision regarding lending. Average: $195 to $795.
Unfortunately, even the above home buying costs are not an exhaustive
list. Therefore, keep in mind that the costs of buying a home are more
than just the price you agree to pay for it. Knowing you'll need to take
into account the other home buying fees will help you to find out how
much you can really afford to buy a home.