What Are the Upfront Costs of Buying a Home?
Written by Harris Johnston Posted On Saturday, 06 July 2019 04:13
You’re searching for a new home and comparing price tags. You come across a house that’s in the area you want to live, the price is where you want it to be, and the home fits all of your wants and needs on paper.
The house is perfect in every way, and you’re ready to put in an offer.
However, before purchasing a home, you need to know what the upfront costs will be, whether they’re considered hidden or not, and which fees apply to your situation.
The upfront costs of buying a home
According to The Balance, some of those upfront costs can include private mortgage insurance, homeowner’s insurance, title insurance, appraisal fees, escrow fees, points or origination fees, credit report fees, document preparation fees, survey fees, pest or mold inspection, property taxes, and state recording fees.
Of course, all of these fees might not apply to you, but it’s still best to be prepared for all costs before purchasing a home. After all, the sale price might seem doable, but you might not have enough cash on hand if you can’t afford all of the other fees mapped out above.
In a less-severe case and what’s typical when buying a home, you will have to pay out-of-pocket fees for earnest money, an inspection fee, and an appraisal fee.
According to Redfin, earnest money is paid once the seller and buyer agree on the offer, and the price can range from 1 to 3 percent of the home sale price. The inspection fee is typically $300 to $500 and is paid during the inspection. The appraisal fee is paid after the inspection and is also typically $300 to $500.
You also must consider conveyancing fees during the home-buying process. Conveyancing is essential because a conveyancer will help with the settlement and title transfer process. This type of professional will ensure you’re meeting all legal obligations, and will draw up the necessary documents for the sale and purchase of a home.
Clearly, buying a home has a lot of upfront costs, which is why it’s important to see exactly what upfront costs relate to your situation so that no hidden fees arise.
SmartAsset has a closing-cost calculator that can help you figure out an estimate for your home.
As an example, a person would need $56,151 at closing for a home for $200,000 in Pico Rivera, California. That total includes a down payment of $50,000 (20 percent). It also includes one-time closing costs and fees of $3,899 and escrow and prepaid expenses of $2,252 for a grand total of $6,151 for closing costs. The calculator breaks down each cost in further detail so you can see what every individual fee is and what you’re being charged for.
Those figures are, of course, based on a mortgage of $200,000. It’s important to actually type in what your desired mortgage and down payment are, where you’re buying a house, and other relevant figures.
The good thing is that the costs mentioned above are only one-time fees. Going forward, you’ll only have to worry about your mortgage, wear and tear, and necessary updates to your home. For example, if a bad hailstorm hits your house, you might need window and door installation in Morris County, NJ, or wherever you live to repair your windows, doors, roof, or whatever is damaged.
As you can see, the price tag on a home is just the beginning, which is why it’s essential to know upfront costs of buying a home before putting in an offer and possibly getting your hopes up.