When buying a home, it may seem overwhelming to consider affording the asking price, but when you factor in all the hidden costs of buying a house, the realization hits home that this is an expensive prospect! The most common hidden costs that buyers should be aware of include:
- Down payment
- Appraisal
- Inspection
- Closing costs
- Attorney fees
1. Down Payment
This is pretty obvious, as most people know they have to put something down before they buy a home. But what may escape you is the fact that you have to pay private mortgage insurance (PMI) if you put less than 20% down – which is prorated into the closing costs. You will have to pay a monthly PMI fee until 20% of your loan has been paid, easily adding thousands to the cost of your loan.
2. Appraisal
Your lender wants to be sure that the loan they’re about to give you is worth what the seller says it’s worth. Home appraisals are required before finalizing a mortgage loan agreement, unless the buyer decides to waive it, which is happening more and more these days. But in general, the lender hires a certified appraiser to assess the property value, taking into consideration the features that make the home valuable such as decks, finished basements, new roofing system, etc., as well as the prices of comparable homes that have recently sold in the neighborhood.
Appraisal fees can vary but they range from $400 to $600, which the borrower is responsible for paying. You will pay more for rush jobs.
3. Home Inspection
After you’ve made an offer on a home, a certified home inspector will examine the property to ensure there are no major issues before closing. They will look for hidden structural, mechanical or other types of issues, and let you know what they are so you can negotiate with the seller to have them fixed before signing on the dotted line. This is another contingency that many buyers are waiving in an effort to appeal to sellers.
Basic home inspections run between 400 and $600, but you’ll pay extra for pest inspections and septic inspections. These are all out-of-pocket cost that are non-refundable. Basic home inspections are precautionary measures that are not mandatory but highly recommended.
4. Closing Costs
In addition to your down payment, make sure you budget for another two to five percent of the purchase price to cover closing costs, which includes loan origination fees, attorney fees, homeowners’ association fees and taxes.
5. Attorney’s Fees
An attorney should be involved in any real estate transaction to ensure everything is being done legally. They will prepare and review paperwork, as well as handle any legal issues that may arise along the way. If a lawyer charges an hourly fee, it’s usually in the range of $150 to $350 per hour. Some charge a flat rate that ranges from $500 to $2,000 for assisting on real estate transactions.
Contact Berkshire Hathaway Premier Properties
Is your mind boggling with all these hidden costs? Let your agent sort them all out and explain them to you in great detail. To reach out to one of our experienced buyers’ agents, contact Berkshire Hathaway Premier Properties today at 713-862-0000.