When purchasing a home, most people will focus on the house’s cost and the interest rate they can get on the mortgage loan. While knowing what these costs are is important, they are not the only expenses seen during the homeownership journey.
Some fees require upfront payment, while others are ongoing. With the ongoing fees, it is possible to use tools to determine ongoing costs. For example, energy comparison tools allow you to see how much energy in your new home will cost per month. However, there are fixed costs to consider, as well.
Keep reading to learn about some of the top costs that new homeowners incur.
The Down Payment
For most people, the down payment is the largest expense they will have when closing a loan. While some loans, such as VA and USDA loans, don’t require you to make a down payment, most homebuyers will need a minimum of three percent of the total home purchase price.
Origination, Underwriting, and Application Fees
The origination fee will be paid to the lender or bank for their services in creating the loan. There may also be an underwriting fee, application fee, and a fee to pull your credit report.
In some situations, you may want to pay for discount points. These will cost about one percent of the loan. These discount points can be used to help reduce your monthly payment and interest rate. The points will be paid to the lender when closing on the purchase.
It is also necessary to pay fees related to your home’s title. Usually, you will incur charges for the title search, title insurance binder, title insurance, and title settlement. You can shop around for these title services if you are interested in negotiating lower prices.
The title insurance is used to protect a lender if a problem arises with the home being purchased. You are typically required to purchase the lender’s title insurance, which can be included with your closing costs, or they can be financed into your loan.
Appraisal and Survey Fees
If a current survey of the land you plan to buy is unavailable, then a new one is necessary to mark your property’s boundaries. Usually, you will have to pay around $500 for this service.
Appraisals are also needed in most cases. This allows a lender to justify the funds they are giving you for the property. The appraisal is a one-time fee that you must pay your lender upfront before any appraisal is done. Usually, this will cost between $300 and $400.
State Recording Fees
Based on where you live, you may have to pay a fee for holding or recording the sale’s information with the county register of deeds. There could also be a charge for transferring the property from one owner to another, which is called a transfer tax.
Interest, Homeowner’s Insurance, and Prepaid Property Taxes
You will also own money for property taxes and for homeowner’s insurance. You should expect to pay a minimum of 12 months’ worth of insurance upfront along with six months for taxes. It is also necessary to pay insurance for the loan for any remaining days in the current month.
Private Mortgage Insurance
Sometimes it is necessary to buy mortgage insurance. This is dependent on the type of mortgage loan being taken out. Mortgage insurance is now required for all USDA and FHA loans. It may also be necessary if you pay less than 20% down on your loan.
As you can see, there are many fees and costs that go along with buying a home. Keep this in mind as you get ready to venture down the road to homeownership.