When you’re thinking about making moves in real estate, it’s necessary to consider the fees when buying a home outside of the down payment in order to close the deal. It’s important to remember that there are several other costs that you’ll need to cover as well. All too often, potential buyers spend years saving for the deposit, only to realize that they still can’t afford to buy a home, as they can’t cover the other fees.
Besides preventing frustration and heartbreak as you watch your dream home get snapped up by another prepared buyer, knowing the other fees when buying a home ensures you can properly budget. This way, you can be sure that you can afford your new home, plus the extra fees, and still have some cash in the bank for those unexpected costs after moving in. Below, we take a look at the 9 fees that are well worth considering.
Home appraisal
When you take out a mortgage, your lender will require an appraisal to be taken out on the property in question. This lets them know that you’re not paying too much, and that they, in turn, aren’t lending more money than they should. Nationwide, the average cost of a home appraisal is $335.
Home inspection
In addition to the appraisal, it’s important that you have the property inspected by a certified home inspector. While not all lenders require this, it’s a good idea to have an inspection carried out regardless. Inspections differ from appraisals in that while an appraisal is used to determine the value of a property, the inspection is used to determine the physical state of it. Inspectors will be on the lookout for damage that needs to be repaired, potential health risks, and other things the buyer should be aware of. The average cost for a home inspection is $315, though it can save you thousands in repairs you didn’t know about.
Legal fees
You’ll need to hire a real estate attorney to help your transaction run smoothly and ensure that everything is above board. Legal fees differ from case to case and are generally calculated based on the sale price. When you get a quote from an attorney, be sure that their price includes all additional expenses besides the legal fees themselves.
Home insurance
While it’s not always a requirement to take out home insurance coverage, it’s well worth the additional cost. Standard policies generally cover theft, fire, flooding and severe weather, though you can normally tailor your premium to your needs. You can expect to pay anywhere from $500 to $2,000 per year on average, with more extensive policies costing extra.
Title insurance
Most lenders require you to take out title insurance as it covers them if any issues arise regarding the title of your property. As such, most mortgages will include this cost, either as a closing cost, or rolled into the total loan amount. The cost differs state to state, but you can expect to pay around 1% of the purchase price of the property.
Additional lender fees
When you take out a mortgage with a lender, you will need to pay a few additional costs to ensure your application is completed fully. Origination fees are paid to the lender for their services in creating the loan, and generally cost 1% of the total loan amount. This fee is typically added to the loan automatically. Additionally, you can expect to pay small fees for the preparation of any documents, as well as fees associated with obtaining a verified copy of your credit report.
Moving costs
Once the closing costs are covered, there’s still the moving costs to consider. These include professional moving service fees, utility hookups, parking permits, etc. Also, be prepared to cover the cost of any prepaid bills or taxes that the previous owner had already paid in advance. Together, these costs can easily reach $5,000-$8,000.
With proper guidance from your Real Estate Team – your Real Estate Broker, Mortgage Broker and Lawyer, you will be well-prepared in advance for the fees when buying a home and have the right money allocated and set aside for the incremental home buying costs. And being prepared will ensure a smooth transaction as you enter your new house or condo.