Are you getting ready to buy a home? Thinking about buying one? Some of the things you may want to think about are the costs associated with purchasing a home, as there are many costs to consider in addition to your down payment. When buying a home, here a few things to think about.
Down Payment – Definitely the largest expense as part of the loan closing process, but large deposits are not necessarily needed to qualify for a mortgage. Some borrowers can qualify for a mortgage with as little as 3% down. Additionally, there are various first-time homebuyer programs that offer funds toward a home purchase. Examples are programs offered by local governments and mortgage companies that can assist with closing costs, down payments and more.
Appraisal – Traditional mortgage companies currently require that an appraisal be purchased. This is an “upfront” cost that will typically be paid BEFORE the closing.
Property Insurance – Property insurance coverage is typically required to be bound and paid for one full year at the time of closing. The buyer has the right to shop for property insurance using their own carrier and should get quotes and price out policies.
Title and closing costs – There are several fees related to the title and insuring your home. Typical fees include: title search, title settlement, title insurance binder, and title insurance. While our closings are conducted by an attorney, our office does not charge an extra attorney’s fee. #MoreBangForYourBuck
Home inspection – While not a “requirement,” it is definitely a cost you should plan for. Think about it…this will probably be the largest financial purchase you will make in your lifetime and you want to know everything about the house before you get too far into the process. It’s no different than that camera you spend hours researching and researching until you find the right one. The same goes for home inspections, you should be aware of everything this house has to offer or conversely, what may be wrong with the property. A typical inspection doesn’t usually exceed $500, but the information you get from the inspection is priceless. It’s best to get a list of issues or potential issues before you decide to go through with the deal. Depending on the terms of the Real Estate Contract, you are typically afforded a few days to conduct an inspection and if you are dissatisfied for any reason, you may be able to walk away before the expiration of the inspection period and get your good faith deposit returned.
Private Mortgage Insurance – If you are unable to come up with a minimum of 20 percent down on the purchase, you may be required to purchase mortgage insurance (PMI). PMI increases your monthly payment, depending on what type of mortgage you have arranged.
Realtor Commissions – If you’re using a real estate agent, you may or may not have a commission to deal with. Sellers often pay the commission, but in some cases, there are fees associated with the realtor that come from the Buyer. Before signing the contract, make certain that you know and understand the commission structure. Most real estate transactions have a commission of 6%. If there are two agents, the commission gets split at around 3% for each agent.
Lender-based Origination, Underwriting, and Application Fees – An origination fee is paid to the bank or lender for their services in processing and putting the loan together. Other fees may include: underwriting fee, application fee, and a credit report fee.
Khani & Auerbach is committed to educating the public about various topics in real estate. For more information, or if you have any real estate transaction needs, please do not hesitate to contact us.