Buying a home involves more than just the upfront purchase price. As a first-time home buyer, it’s crucial to grasp the additional costs that may catch you off guard. Explore the 9 crucial expenses associated with buying a home to make informed decisions and ease the financial aspects of the process.
1. Earnest Money Deposit:
Demonstrate your commitment to the purchase by putting down 1-2% of the total purchase price as an earnest money deposit. Market conditions and state regulations may influence this amount, providing room for negotiation.
2. Escrow Account:
Ensure you have enough funds to cover taxes and mortgage insurance through an escrow account. The amount varies by location, lender, and loan type, commonly applied to loans with less than a 20% down payment (not mandatory for VA loans).
3. Origination Fee:
Pay the loan officer or broker for underwriting and processing costs through the origination fee. Typically around 1% of the total loan, it’s essential to shop around using your good-faith estimate for the best deal.
4. Inspection Costs:
Secure your new home’s soundness with inspections:
- Home inspection: $300-$500
- Radon inspection: Costs vary
- Pest inspections: Around $100 for termite inspection
5. Credit Check:
While you can access your credit report for free, lenders may charge around $30 for the check. It’s a small cost to ensure your creditworthiness.
6. Extra Insurance:
If you live in a hazard-prone area, consider extra insurance, such as flood coverage.
7. Appraisal Fee:
Determine your home’s fair market value for the lender by paying an appraisal fee, typically $300-$400 depending on location and property size.
8. Title Company Charges:
Ensure the property’s title is clear by paying the title company. While your lender may recommend one, shopping around is advisable.
9. Survey Costs:
Though not always required, your lender might insist on a professional surveyor to determine property lines, typically costing at least $200.
Remember, you have negotiating power. Research rates and fees in your area, seek explanations for charges, and don’t hesitate to negotiate if you find terms unfavorable. Understanding these costs arms you with the knowledge needed to make savvy real estate decisions.