There are costs when buying a home, most people know about THE price of the home and the associated down payment with the balanced financed over the course of the mortgage. However, here are 10 “Other” Categories of Costs When Buying A Home. Let’s review them.
Per Craig Donofrio in Realtor.com November 7, 2023, “The costs of buying a home go well beyond the actual purchase price. If you’re a first-time home buyer, you might get a little queasy when the last line of your good-faith estimate comes in at several thousand dollars. And after the color returns to your face, you might also be a little more than perplexed by some of those fees.
Knowing what you’re paying for when you’re buying a home—like these 10 costs of buying a home—can ease that check-writing pain.
10 Costs of Buying Home
10 Costs (Photo: Mabub Hasan, Pixabay)
10 “Other” Costs of buying a home
#1: Earnest money
To prove you’re “earnest” in your purchase commitment, expect to plunk down 1% to 2% of the total purchase price as an earnest money deposit. This amount can change depending on market factors. If demand in your area is high, a seller could expect a larger deposit. If the market is cold, a seller could be happy with less than 1%.
Other governing factors like state limitations and rules can cap how much earnest money a seller can ask for.
#2: Escrow account
An escrow account is basically a way for your mortgage company to make sure you have enough money to cover related taxes and mortgage insurance. The amount you need to pay varies by location, lender, and loan type. It could cover the costs of buying a home for a few months to a year.
Escrow accounts are common for loans with less than a 20% down payment and mandatory for FHA loans, but it’s not required for VA loans.
#3: Origination fee
The origination fee is a hefty one. It’s the price you pay the loan officer or broker for completing the loan, and it includes underwriting, originating, and processing the costs of buying a home.
Origination Costs for Mortgage Loan
The origination fee is a small percentage of the total loan. A typical origination fee is about 1%, but it can vary. Use your good-faith estimate to shop around.
#4: Inspection
You want to be assured your new home is structurally sound and free of surprises such as leaks or pests living in the walls. Those assurances come with a price.
Home inspection: This is critical for home buyers. A good inspector will be able to notify you of structural problems, flooding issues, and other potentially serious problems. Expect to pay $300 to $500 for a home inspection, although cost varies by location.
Radon inspection: An EPA-recommended step, this inspection will determine whether your prospective home has elevated levels of the cancer-causing agent radon. A professional radon inspection can cost several hundred dollars.
Pest inspections: Roaches are one thing. Termites are a whole different story. Expect to pay about $100 for a termite inspection.
#5: Attorney
Some states, such as Georgia, require an attorney to be present at closing. In some other areas such as in Arizona, this is optional. If you use a lawyer, expect to cover the costs, which vary by area and lawyer.
It’s typical for mortgage companies to have a lawyer on their end, although they should cover the bill.
#6: Credit check
Just because you can get your credit report for free doesn’t mean your lender can (and it will actually pull all three). You have to reimburse the lender, usually around $30.
#7: Extra insurance
If you live in a hazard-prone area, you might need to purchase extra insurance, like for flood. (Note if you were previously renting, you may have had only a small renters insurance policy).
#8: Appraisal
Your lender won’t loan you money for a home without knowing what its fair market value is. An appraisal will cost $300 to $400, depending on location and property size.
#9: Title company
You pay this to the title company to make sure the property’s title is free and clear. Your lender will recommend a title company, but you can also shop around for one.
#10: Land Survey
It’s not required in all instances, but your lender may require a professional surveyor to determine exactly where your property lines are drawn. Prices vary widely, but expect to pay at least $200.” This is more likely in rural areas and a more unlikely in a built subdivision.
When you are ready to buy a home I as your buyer’s REALTOR will walk you through each of these steps and can develop a preliminary closing cost estimate for you.