When buying a home, the price paid for the house is just one of the costs associated with the purchase. Many buyers are hit with sticker shock when all the costs associated with their purchase start rolling in. These costs can total in the thousands of dollars.
The first check a buyer has to write is the earnest money check. This is the check that accompanies the buyer's offer on the home. It is typically in the $1,000 to $5,000 range (though the amount can be much higher in the luxury market) and acts to show the buyer's good faith in trying to acquire the property. On the plus side, the earnest deposit is applied to the purchase price at closing.
The buyer will pay an origination fee to the lender providing the mortgage on the property. This is to cover the costs of doing the loan including processing and underwriting the loan. This amount varies among lenders, and buyers should shop around, but $800 to $1,000 is common. The lender will also charge the buyer for doing a credit check on the buyer. This is typically around $30.
Every buyer should have a home inspection preformed on the home they want to purchase. A professional inspector will expect to be paid as soon as the inspection is complete. A general inspection that inspects the roof, plumbing, electrical, heating, and general condition of the home typically cost between $300 and $500 with additional charges for additional specialized inspections like water quality, radon, air, pest infestation and septic. This is money well spent to avoid unexpected problems popping up after the home is purchased.
Lenders require a licensed appraiser to do an appraisal on the home to establish the value of the home. The appraisal will have to be paid for in advance. Appraisals are running about $450 to $500 and up to $800 for expedited appraisals.
The title company that handles the closing get paid for their services and $400 to $600 is common. Sometimes there are additional charges if there are issues that require extra work like a full survey, for example.
At closing, the buyer's lender will also require that the home is insured and all taxes are paid.
These pre-paids and escrows will depend on the cost of the home insurance and the annual of taxes on the property, but run into thousands of dollars.
It is important to have these costs covered along with the down payment in order to buy a new home, but it is sometimes possible to get the home seller to contribute some of these costs. Ask your realtor to help make this part of your negotiation.
Rick is a realtor, real estate author, and long time Windham resident. You can contact Rick with all your real estate questions and needs at email@example.com