When buying a home, most people focus on how much it costs and what interest rate they can get on the loan. While that is certainly very important, the other fees that come with buying a home are often overlooked. Here is a list of the most common fees involved when buying a home.
- Private mortgage insurance: If you only provide a small down payment, you may be required to purchase private mortgage insurance. Sometimes this means you are required to pay a full year’s worth at time of purchase, or it will be rolled into your monthly payment.
- Homeowner’s insurance: When borrowing money to purchase a home, insurance is required. In many cases, this means buying a policy before closing on the home.
- Title insurance: This insurance covers you in the unlikely case that the person who sold you the house didn’t actually own it or if information on the title was false.
- Appraisal fees: An appraisal is needed so that a current fair market value for your home can be established for tax purposes.
- Escrow fees: During the closing process, an escrow account will usually hold the money while the buyer and seller finalize the agreement. In addition, you’ll probably have a portion of your monthly mortgage payment go into escrow in order to pay for property taxes and insurance.
- Points or origination fees: An origination fee is paid to the bank or lender for their services in creating the loan. A point is 1 percent of the loan, and is often worked into the total cost of the loan.
- Credit report fees: In order to secure a loan, the lender will require a verified credit report.
- Document preparation fees: The lender or broker will usually have a fee to cover the preparation of the required documents for the loan.
- Survey fee: If an existing survey of the land cannot be obtained, a new survey will have to be conducted in order to determine exact boundaries of the property.
- Pest or mold inspection: While not generally required for a brand new home, the purchase of an older home may require an inspection for pests such as termites as well as mold. This requirement can vary by location.
- Property taxes: In some cases, you may owe some property taxes immediately if the seller has already paid taxes for a time period where you will be the owner. Also, there may be other municipal taxes or fees for sewer or water that need to be taken care of.
- State recording fees: Depending on where you live, there may be a fee required for recording and holding the information regarding the sale.
Keep in mind that not all of these fees will always apply. Some may be waived or paid for by the lender or seller. Even so, it is important that you understand what the fees are and who is responsible for paying them before finalizing the purchase of your new home.