A home purchase is the largest and most prominent financial transaction in a lifetime. You probably know what you hope to pay for the home, but what about all of the other costs? Before beginning the process it is prominent to understand what buying a piece of real estate will cost you beyond what you pay the jobber of the home, and what you are getting for each of these fees. You will also want to know which are negotiable or may vary from firm to firm so you can get the best deal.
Here is an explanation of many of the fees linked with buying a home. Depending on the details of your singular transaction there may be added costs, but this covers many of those you are likely to encounter.
- Earnest Money - Paid as part of your offer to the jobber it indicates that you seriously intent to buy the home. If you resolve to back out of the purchase compact once it has been executed and agreed to by all parties the earnest money goes to the seller. Earnest money is part of the buyer's down payment, and the balance is paid at closing.
- Real Estate Agent Commission - Most home sales involve two real estate agents, one representing the buyer and one representing the seller. Their commission, or pay for their role in the sale, is paid out of the seller's proceeds at closing and is ordinarily a division of the sales price. The suitable fee is 3% of the purchase price to each agent, but real estate agents may be willing to lower their commission in a contentious market or on very high value properties.
- Loan Origination Fee - The fee paid to the lender or broker you acquire your mortgage loan through for the work they do to originate the loan. The estimate of this fee will vary from firm to company. When comparing be sure to look at all of the rates and fees charged by the mortgage firm so you can be sure you are choosing the best deal. One may have lower origination but a higher rate (and monthly payment). The origination fee is paid by the borrower at closing.
- Loan reduction Fee - Also called "points", the borrower pays this fee to the lender in order to receive a lower interest rate on a mortgage. It is paid at closing.
- Appraisal Fee - An appraisal is an primary piece of any real estate transaction. It is a record of the current market value of the property being purchased and helps the borrower resolve that the home they are buying is worth what they expect, and the lender see the loan to value ratio of the mortgage. The appraiser is ordinarily paid by the borrower when the appraisal is ordered or when the appraiser goes to the property to explore it. This is not the case in Va loans, where the borrower pays for the appraisal at closing. Recently passed laws wish lenders to use a rotating list of appraisers (to avoid inappropriate work on on values) meaning the borrower cannot shop nearby for their appraisal to get a lower price. The cost may vary slightly from lender to lender, and will be higher for higher value properties.
- Credit record Fee - The cost of pulling your credit report, ordinarily from all three credit bureaus, to be used as part of your mortgage application. Can be paid at closing or upfront as part of an application fee. Lenders are only allowed to payment the exact estimate they were charged for the credit record but the cost each lender pays their credit vendor may vary.
- Tax assistance Fee - This pays to quest for delinquent property taxes to be sure the accounts are current when you purchase the property.
- Flood Certification Fee - The "Flood Cert Fee" is paid to resolve whether the property is located in a flood zone. If it is you will be required to purchase flood insurance.
- Pre-Paid Items - Some fees are required at closing, such as the interest on your mortgage from closing to the day your first cost is due, and the assurance selected for the first year as assurance is ordinarily paid in advance.
- Escrow Reserves - When you escrow for items such as taxes and assurance it means that you pay them as part of your mortgage cost each month, and then the bills are paid when due by your mortgage company. To get the catalogue started you will be required to fund it with a few month's worth of escrow payments at closing. The estimate will be considered by your tax obligation and the estimate of your assurance premiums. You will likely find that assurance costs vary greatly from one firm to another so it is smart to get several contentious quotes.
- Title Fees - Paid to have a title firm quest the records for unpaid liens on the property. They also issue an assurance course to safe against any liens that exist but were not uncovered in the search, record the deed following closing, and perform the loan closing. If your state requires that an attorney perform the closing you will also see an attorney fee. You can shop nearby for all of these services in order to save money.
- Government Recording and exchange Fees - Costs charged by city, county, or state government relating to recording the new deed, and taxes charged when proprietary of a property changes. Like most taxes and government fees they are non-negotiable.
- Additional Fees to expect - Depending on your situation there may be added fees linked to your real estate purchase such as a pest inspection, explore of the property, and final inspection by an appraiser. Again, this list does not cover every fee for every scenario, but is an explanation of many of the costs you are likely to encounter.
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