Unexpected Real Estate Fees
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What Unexpected Fees Are Involved in Buying a Home?
When you buy a home, it’s likely you are expecting to be making principal and interest payments. But when your lender provides you with your loan estimate, you may be in for a rude awakening as many other fees will be added on. If you are aware of what these fees are and how they originate, you may be able to take steps to minimize and plan for them.
This article will review some of the common fees you may encounter so you will know what to look out for when you are getting a mortgage on your home.
Appraisal Fee
Before you can close on your mortgage, your home will need to appraised. An appraisal is done by a third party to determine your loan to value ratio and it will result in a one-time fee that can range from $300-1000. Appraisals are a necessary part of the closing process and they are unavoidable.
Home Inspection Fee
Another necessary part of the closing process, a home inspection is done to make sure the home is livable and structurally sound. The inspection typically costs $300 - $500.
Credit Report Fee
Lenders will want to know your credit rating so they can determine the amount of risk they are taking in giving you a loan. There are financial institutions like Credit Karma that provide free credit monitoring but your lender may choose to pull the score themselves which can result in a fee that can range from $30-$50.
Some lenders will cover this fee themselves. Talk to your lender to find out if he or she will be agreeable to covering this cost. Every penny counts!
Document Prep Fee
Lenders may also charge you for the time and administrative expenses that go into them preparing your documents. This fee typically ranges from $50-$100 and it is often negotiable. Talk to your lender to find out how flexible they will be in lowering this cost.
HOA Fees
Buying a townhouse or condo can be more affordable than purchasing a house, but be warned, HOA fees often apply. These are fees that are paid to the homeowner’s association for the upkeep of the property. Even though these are an added expense, they may be worth it in the long run in comparison to the money homeowners spend on major repairs.
Loan Origination Fees
Probably the biggest expense you will encounter, the loan origination fee is the primary way lenders make money. This fee will equal 1% of the total loan amount. So if your mortgage is $100,000 expect to pay your lender a $1000 origination fee.
Title Fees
When buying a home, the title must be transferred from the old owner to the new owner. This can result in a variety of fees. For example, there may be a search fee if a search is done to see if anyone has a claim to the title. There may also be a recording fee that is paid to the local recording office to make the sale a matter of public record.
Some homeowners may also choose to get title insurance to protect their investment.
The fees you pay on the title can be negotiated. The saving may not amount to much but any savings is good.
Taxes
Homeowners can also expect to pay taxes that include county and city property taxes and a transfer tax for transferring the title. Just like the famous Mark Twain saying dictates, these are unavoidable.
There are many fees attached to a mortgage. In some cases, you may be able to talk to your lender to have these reduced. You may also be able to counter fees with tax deductions (talk to an accountant for guidance). Good luck making your mortgage fees as low as possible.
