What “Fees” should a Home buyer expect when Purchasing a Home?
It is very exciting to purchase a new home but that excitement can fade a bit if the home buyer is not aware of fees or costs associated with buying a new home. As with everything we purchase there are typically “hidden fees” added to the when purchasing a home. Here are some fees and costs that may creep up on you in the home buying process:
- Loan Origination Fee: Usually 1% of the loan amount. Goes to the lender for preparing the loan.
- Points: Each point is equal to 1% of the loan amount. Points buy down the interest rate typically by 0.25% per point. They are tax-deductible.
- Application Fee: Goes to the lender or the broker to check credit and process the initial loan application.
- Attorney Fee: Goes to the attorney representing the buyer at closing.
- Appraisal Fee: Goes to the appraiser who determines the value of the property.
- Title Search an Examination Fee: Pays for the lender to research the property’s title to find out if there are liens and who the rightful owner of the property is.
- Mortgage Broker Fee: Paid to the broker for finding and arranging the loan on your behalf. Can be up to 5% of the loan amount but is usually much less. Should be negotiated prior to service.
- Home Inspection Costs: Before you close on a house, your mortgage insurer may require a home inspection, which can run several hundred dollars. But even if an inspection is not required, it’s worth paying a professional to evaluate the house so you can avoid spending hundreds of thousands on a train wreck disguised as a house.
- Pest Inspection Fee: Florida is known for its diversity of bugs, best to make sure they are not feasting on your new home.
- Survey costs: Your lender may want you to have a professional survey of the property, so everyone knows exactly where your land’s boundaries are. Surveys can add several hundred dollars to the equation.
- Taxes: You probably know you are going to be paying taxes but it can be easy to forget that you will likely need to prepay those taxes at closing.
As you can see these costs add up. Typically, home buyers will pay anywhere between 2 to 5 percent of the purchase price of their home in closing fees. By law, lenders are required to provide buyers with a good faith estimate within three days of loan application. In an effort to take some weight off of these closing costs, buyers may want to consider negotiating with the seller to assume some or all of the buyers closing costs. What you do not see on this list of buyer costs is Realtor fees. In most cases, commissions paid to the agent listing the home and to the Realtor that brings a buyer to the table are included in the sellers closing costs.
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