More often than not I am approached by 1st time home buyers who do not realize there are additional lending and closing costs that they will be expected to pay throughout the home buying process. These fees are in ADDITION to your down payment and can add up to approximately 3 – 5% (or sometimes more) of the actual purchase price of the home. Many of these costs vary lender to lender. Closing costs encompass dozens of potential fees which are assessed depending on your specific situation.
Here are just a few fees that you may, or may not, be aware of as you begin to budget for your new home:
- Home inspection. This is a crucial step in the home buying process. The inspector report that is derived from the home inspection can help you negotiate price and repairs. Generally, you can expect to pay between $300 to $500 depending on the size of the home and the location.
- Title services. Title services cover the transfer of the title from the seller and a thorough search of the property’s records to ensure that no one will pop up with a claim or lien on the property. Additionally, you may need to buy title insurance which will protect the lender or your investment in the home.
- Appraisal fee. Before getting a loan, your lender will most likely require an appraisal of the home to determine its estimated value. This will be conducted by a third-party company and the cost can land anywhere between $300 and $1,000, depending on the size of the home, whether it’s a “Rush” appraisal and other factors.
- HOA fees. Many communities have a homeowners’ association that enforce monthly fees. This money is used for general maintenance and updates to areas like pools, parks, green spaces, signage and more. Typical HOA fees are around $150-300 per month for Condo’s or for a majority of local Kenosha County subdivisions it can be a few hundred dollars for the year.
- Taxes. The taxes each buyer pays at the closing table differ, but it is not uncommon for it to be up to two months’ worth of county and city property taxes. Additionally, there may be taxes for the transfer of the home title.
- Lender Fees:
- Underwriting fee: Underwriting fees are those associated with an underwriter reviewing your application and determining if the lender is willing to provide you with a loan and under what terms that they may be.
- Origination fee: Underwriting, processing document preparation and funding fees may all be lumped into one charge called an origination fee. This is usually a percentage of your loan amount.
- Processing fee: A processing fee is simply to cover the cost of processing the documentation related to your mortgage application. The processing fee can be between $300 to $1500.
- Commitment fee: The lender can charge a borrower a commitment fee to keep a line of credit open, or to guarantee a loan for a future date. In many cases, borrowers can avoid paying this fee.
- Loan Application fee: Application fees are often paid to cover other costs noted above, such as appraisal, processing and underwriting fees. Some companies charge this fee to ensure that the borrower doesn’t go elsewhere. The cost for this can range between $25-$150…or more!
At the very minimum, ask your lender to explain and justify each fee that they may charge and get an estimate on what those costs may be BEFORE putting in an offer on that home. Purchasing a home is usually one of the biggest financial decisions you will make in your lifetime, don’t be timid. Ask the questions!
Contact Char to start searching for your dream home today.