Most first-time home buyers believe that when buying a house, you pay for your down payment and you are good to go – right? Well, we hate to break it to you, but there are some other fees involved.
However, most of these fees are lumped into your closing costs or can be paid as part of your mortgage. It is important to understand what each individual fee is for to ensure a successful home purchase.
Let’s break these fees down, shall we?
Getting a general idea
After applying for a mortgage, you should receive something called a loan estimate.
This sheet will likely break down the estimated costs and fees that your home purchase will entail.
Even more so, you should receive a closing disclosure a few days before closing that will give you a better idea of the fees you will need to pay.
This one is where the money’s at – literally. Depending on the type of loan you are financing, this will be your largest payment. USDA and VA loans typically require no money down, but for most homeowners, you will have to pay up.
Conventional loans require a minimum down payment of 3% and FHA loans require 3.5%.
So, if we take the average sales price in Lakeland right now, which is $229,000, this equates to a down payment of $6,870 to $8,015.
Lender based fees
These types of fees are usually comprised of:
- Origination fee – paid to the lender or bank for their services.
- Underwriting fee – this can be charged in addition to or in lieu of an origination fee. It is the fee paid to the lender for evaluating your loan application.
- Application fee
- Credit report fee
Title based fees
The title to your home is the legal document that includes specifics about the property and claims you as the owner.
So, it is safe to say, it is a very important and required service to have your title searched and protected.
These fees will include:
- Title search fee
- Settlement/closing fee
- Title insurance
It is important to note that title insurance for yourself is optional, but the lender’s title insurance is required to protect them in case issues may arise during the title search. This insurance is usually included in closing costs or rolled into your mortgage.
Also, not required for yourself, but a HIGHLY encouraged service to pay for is a home inspection.
The following are the seemingly “small fees” that can easily add up if you do not account for them.
However, these fees are typically factored into closing costs.
- Survey fee
- Appraisal fee
- Recording fees
- Prepaids for taxes, interest, and home insurance
- Private mortgage insurance if you are putting less than 20% down
- Escrow fees
- Termite inspection or WDO inspection – required for older homes and certain loan types, such as VA and FHA loans.
The seller often pays the commission owed to your buyer’s agent; however, you can probably count on paying a transaction fee to the Real Estate office your agent is licensed with.
Keep in mind that fees vary depending on everyone’s situation, and it is not uncommon to have the seller pay some of your closing costs. Do not let these numbers discourage you, but to only motivate you to talk to a lender and get an idea of what you can afford.