Lesser-Known Fees That Factor Into the True Cost of Home Buying
Buying a home can be a tricky process, and there are plenty of little costs that can add up. How can you prepare to cover these costs?
Since most people focus on the larger costs, such as the down payment and mortgage payments, they tend to overlook the smaller fees that come with buying a home.
Here are a few of these lesser known fees and what they could cost you.
Home Inspection
A home inspection is critical to protecting you from buying a home with hidden issues that could ruin your finances. The inspector looks for structural and general issues with the home. Inspections cost between $300 and $500, and whether or not you end up purchasing the property, you still need to pay this fee. You may also have to hire a specialist if specific issues are found, such as foundation issues or termites.
Appraisal Fee
This appraisal report goes to your lender to assure it that the property is worth what you’re paying for it. If you’re selling, review the appraisal thoroughly for any oddball numbers or descriptions that could affect the value of your home. An appraisal can take about 2 hours and costs between $200 and $425.
Application Fees
Before ever approving you for a loan, the lender is going to run your credit report and charge you an application fee, often lumping the credit report fee in with the application fee. This can run $75 to $300. Be sure to ask for a breakdown of the application fees to understand all costs.
Title Services
These fees cover a title search of the public records for the property you’re buying, notary fees for the person witnessing your signature on documents, government filing fees, and more. These can cost between $150 and $400, and it’s important to get a line item for each cost.
Private Mortgage Insurance (PMI)
When you put down less than 20% on your new home, the lender requires that you purchase PMI once you reach 78% of your loan-to-value ratio or you have 22% equity. So PMI is a policy that you have to buy to protect the lender from you. PMI rates can vary from 0.3% to 1.5% of your original loan amount annually.
Tax Service Fee
This is the cost (about $50) to ensure that all property tax payments are up to date and that the payments you make are appropriately credited to the right home.
Always ask questions when it comes to understanding the fees you’re paying. If possible, print out documents and go through them with a highlighter to indicate any areas you have concerns about. Discuss them with your lender or real estate agent and determine if you can negotiate any of them down.
Don’t be afraid to price shop to ensure you’re getting the best value. Just because you’re spending hundreds of thousands on a home doesn’t mean you should be comfortable throwing thousands of dollars at fees.
Check back on our blog every week for more real estate advice and local articles about living in Albuquerque. And make sure to follow us on Facebook for up to date real estate news for Albuquerque and surrounding areas.
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