When you buy a home, there are more expenses than the price you agree to buy it for from the seller. Awareness of the additional fees associated with the purchase of a home helps you avoid unexpected surprises. Here are some of the fees that you need to budget for when determining how much cash you need to have on hand or in your checking account when buying a home.
There are many fees associated with securing a mortgage for a home. The application fees typically range from $500 to $1,000. You will also pay a fee for the bank to get your credit report. Some of the other fees you will pay include an origination fee and an underwriting fee. There are additional optional fees, including discount points on the loan's interest rate.
Title fees are associated with the documentation of the transaction. They include the fees for a title search, recording of the title and title settlement. In most cases, you will also pay a title insurance binder and title insurance. The title insurance provides you with financial protection in case of a lien that comes up after you buy the house. For example, if the owner did not pay their water bill, the water utility company could file a lien on your property. The title insurance covers you for liens not found at the time of purchase, and it would pay that bill on your behalf.
Appraisal, Survey and Inspection Fees
Before you can get a mortgage, the lender will charge you an appraisal fee. They send their own appraiser to the property in order to make sure that it is worth the amount you want to borrow. If they think the property is worth much less, then you may not be able to borrow as much money as you need to. You may also need to pay for a property survey. This determines where the property line is. If you are buying a large lot or acreage, you will likely need a survey of the land. Inspection fees also come out of your pocket and are not a part of the purchase price. You might choose to have a home inspection, roof inspection, radon check and pest inspection.
Real Estate Agent Commissions
Real estate agents charge a commission when assisting with the buying or selling of a home. The commission is typically wrapped up in the sale price. In most cases, the seller will pay the commission of the seller's agent and the buyer's agent. However, your contract might include some different verbiage. It is typical for the real estate agent's commission to be 2 to 6 percent of the home's purchase price. If you have a buyer's agent, they usually split the commission with the seller. If you are responsible for any of the commission, this is a fee that can usually be added to the home's final purchase price.