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Buying a Home: Fees to Budget For

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Buying a Home: Fees to Budget For

By Paul Gardner | Industry Topics | Comments are Closed | 25 February, 2021 | 0

The purchase price and interest aren’t the only costs associated with buying a home. When it comes time for closing on a sale, there are a number of other expenses you need to be prepared to pay. 

Home Survey and Appraisal 

Before issuing a loan, all mortgage lenders will require a survey of the land to determine the boundaries of the property and a home appraisal to determine the fair market value of the house. These are both usually paid before the closing, so it is an out-of-pocket expense for which you need to budget. Some lenders, however, will wrap these fees into the closing costs. 

Down Payment 

The down payment is the part of the purchase price that you pay upfront. The amount you pay will vary depending on the type of loan you secure. Conventional loans require 20 percent down while some others require 3 percent. Once you know what type of mortgage you are taking out, you can calculate how much you will need for your down payment. 

Closing Costs 

Every loan comes with closing costs. They are the fees charged by the lender at closing. The actual costs vary by lender, but, on average, these costs equal about 1 to 5 percent of the home’s value. Here is a breakdown of the various fees typically included in the closing costs. Loan Origination Fees 

Loan origination fees are what lenders charge to set up and process a loan. This typically includes courier fees, administrative fees, and underwriting fees. 

Application Fee 

The application fee covers the application process for the loan, including administrative fees and the cost to run a credit report. 

Survey and Appraisal Fees 

The survey and appraisal fees are how much it costs to get a survey of the land and a fair market value of the home. 

Mortgage Broker Fee 

The mortgage broker fee is the commission fee the mortgage broker charges for their services at the end of the mortgage process. 

Loan Fee 

Some loans, such as the government-backed Federal Housing Administration (FHA) loan have an upfront premium that must be included in closing costs. 

Title Search Fee

The title search fee is the costs incurred by the title company when running title searches on the property. Title searches are done to be sure there are no problems in the title that would prohibit the sale. 

Title Insurance 

Lenders will require a lender’s title policy as part of the mortgage process to cover them if there are defects in the title. Buyers also have the option of obtaining owner’s title insurance to protect them in the event of title defects. These fees are included in the closing costs. Property Taxes and Homeowners Insurance 

Depending on the type of loan and whether or not you escrow, you may be required to pay the first year’s property taxes and homeowners insurance at closing. 

It’s not uncommon for homebuyers to have sticker shock at the closing because of all the fees. Don’t be caught off-guard. Plan ahead and budget appropriately for these fees so your closing can be as stress-free as possible.

Home Buyers, Home Loan, Title Industry, Title Insurance

Paul Gardner

Paul’s core practice centers on the examination of title and real estate transactions. He has extensive litigation experience, and has spent several years representing and advising lawyers, real estate agents, and insurance agents in connection with professional liability claims.

More posts by Paul Gardner

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