There are 3 categories of fees you need to consider when buying a home. These fees are in addition to the purchase price of the property.
- Pre-paid costs- Prepaids are expenses that the homebuyer pays at closing, before they are technically “due”. These costs are necessary to create an escrow account or to adjust the seller’s existing escrow account. Prepaids often include taxes, insurance, private mortgage insurance and any special assessments on the property.
- Title Fees – When you purchase a home, you will receive the deed, which shows the transfer of legal ownership, or “title,” to the home to you. Title service fees are associated with issuing a title insurance policy for the lender, as well as any escrow closing fees.
- Lender Fees- Lender fees are charged by financial institutions for processing and funding your loan. These fees often include application fees, attorney fees, underwriting fees, and several other lender specific items such as the origination fee, credit report, and appraisal fees.
What do all these fees mean to you, the buyer? Well, I like to remind my clients that when they are considering their down payment to add anywhere from 2-5% on top of their down payment to cover these fees. Every home purchase is different, and I recommend asking your Realtor and lender to explain these fees in greater detail before making an offer on your NextHome. In our market, depending on the price point and seller situation, it is not uncommon for buyers to negotiate with the seller to assist in covering some, or all, of the closing costs… but again, speak with a professional and be as informed as possible before taking the mortgage plunge! I hope this post answers a few common questions I receive while, at the same time, encouraging you to ask more questions and be better informed before beginning your home search. I am always eager to answer your questions, and help you reach your home buying goals.
Your neighborhood specialist at NextHome CRE
Robert Gideon II