Have you ever wondered how much it would really cost to buy a home? Surface level, you probably have an understanding that a home cost the listing price and that most people put a down payment towards that listing price. However there is actually a whole lot more to it. Yes the downpayment is definitely part of buying a house as i mentioned in last weeks Mortgage Monday blog you aren’t required to put 20% down. It can be anywhere from 0% to 20%. Putting more down just helps you get that little bit of edge when you’re trying to out bid other buyers. Putting 20% down also has some other perks like possibly getting a better interest rate, lower up front fees, lower ongoing fees, more equity on the house going in and a lower monthly payment. As pricey as the down payment can be this is not the only money you will have to spend out of pocket. The less you put down the less you spend out of pocket just keep in mind the benefits of a 20% downpayment.
Now let’s talk about all the costs you have to supply that do not involve the down payment, because there are probably more than you think. First the appraisal fee, this pays for a licensed professional to quote the homes worth before a lender will allow a mortgage offer. The appraisal will range from $300 to $450 on larger homes. Your credit report check will usually cost at most $25. An origination fee will be charged by lenders sometimes for initiating the loan and this will be around $125. Lenders will also charge several hundred dollars to process the initial application.
You then also need to pay for title search to ensure that there aren’t any problems with the property that may come up. Unless it’s a new property you are going to want to have a title search. You really don’t want to find out at the last minute the home of your dreams has issues with home ownership or it has past liens that haven’t been addressed. It’s all to protect you as a buyer. Lenders will require you to obtain title insurance, just in case there are issues with ownership after the sale. This will protect the lender if anything goes wrong and this will cost aroune .5% to 1% of the loan amount. And if the homeowner wants to purchase title insurance to protect their financial interests this will be an additional cost. There is also the underwriting fee or the administrative or processing fee and this will cover cost to evaluate and verify your mortgage this is around $1500.
If you are sitting there right now and thinking “Wow there are a lot more fees than I initially thought when buying a home. Is there anyway I could not pay them all?” The answer to that is yes, sometimes if you put down 20% that can help you bypass a couple of those fees, also you can negotiate some of the closing costs with the seller. Now this all depends if you are in the situation to negotiate, if the seller needs to sell as soon as possible it never hurts to try and negotiate and they will be more likely to agree to it, so it’s worth a shot.
They say that the average closing cost can be anywhere from 2%-5% and on a $300k home that is $6,000 to $15,000 so make sure that you can spare that before you start looking for your new home. Although there are special cases in which you can fold some of the closing costs into the loan if the lender allows. Just keep in mind that it will be taxed for the life of the loan. I hope this information helps and if you would like to learn more about the process of buying a home The Lucido Global Team puts on a home buyer class every month so check us out because we are more than happy to help you find your dream home.