Purchasing a home is one of the biggest financial decisions you will make in your lifetime. As you plan this important step, keep in mind there will be costs associated with your purchase other than the price of the home. Here are 5 fees you need to budget for:
This is a critical part of the home buying process. The final inspection report will give you a clear picture of the property’s condition and help you discover any repairs that you should negotiate into the price or get fixed. Home inspections can also help you identify potential hazards, such as faulty wiring within an electrical panel and similar issues. Generally, you can expect to pay between $300 to $500 depending on the home and the location. But home inspections usually are not required by mortgage lenders. It’s an optional procedure that you can decide on for yourself. In any case, an inspection is well worth the fee in the long run. The Home Buying Institute strongly encourages buyers to have inspections before purchasing a house.
When you purchase a home, you receive a document most often called a deed, which shows the seller transferred their legal ownership, or “title,” to the home to you. Title services cover the transfer of the title from the seller and a thorough search of the property’s records to ensure that no one will pop up with a claim to the property. Additionally, you may need to buy title insurance, which will protect the lender or your investment in the home. In most states, the fee for conducting your closing is also a part of the title service fees.
Lenders almost always want to have an appraisal done before they will approve a home loan, in order to determine how much the house is worth. Once you and the seller have worked out details about a price, repairs, and credits—essentially all the financial give and take—the lender will send an appraiser in to assess the fair market value of the home. This will be conducted by a third-party company and the cost can land anywhere between $300 and $1,000, depending on the size of the home. It is entirely the buyer’s responsibility to pay for the appraisal.
Many communities have a homeowners’ association that enforces monthly fees. Typical HOA fees are around $200 per month. For a typical single-family home, HOA fees can cost homeowners around $200 to $300 per month, although they will be lower or much higher depending on the size of your unit and the amenities. What do you get for laying out all that extra cash? This money is used for general maintenance and updates to areas like pools, parks, landscaping, sidewalks and more.
The taxes each buyer pays at the closing table differ, but it is not uncommon for it to be up to two months’ worth of county and city property taxes. Additionally, there may be taxes for the transfer of the home title. The buyer will pay the property taxes that are due from the date of closing until the end of the tax year. Assuming the seller has already paid for the entire year in advance, the buyer will simply hand over his or her prorated share. Our team can help you understand and plan for the entire closing process to avoid unpleasant financial surprises that can delay your home purchase.