Closing Costs for Home Buying: Charges Incurred When Buying a Home
Many first time home buyers are under the misconception that once they pay the asking price on the property they can move in. In fact, there are many additional closing costs that you have to pay out of pocket. Note that last part – you have to pay out of pocket, so you as you prepare to buy a home you should have this money ready. What are these costs and what can you expect to pay? Here are some of the common ones. Make sure to discuss them with your real estate agent and your lender so that you can know which ones apply to you – it will help with proper budgeting.
Pre-paid homeowners insurance – homeowners insurance is one of the most important investments you will ever make in your new home. In case there is damage to your property your insurance company will reimburse the full cost of the repairs. The amount you will pay will depend on the value of the property that you buy – the higher the value the higher the homeowner insurance premiums.
Cost of appraisal – it is never a good idea to buy a property that you haven’t had appraised. The previous owner may try to convince you that they have already done an appraisal, but you shouldn’t take them at their word. You need to bring in your own professional to do an independent appraisal and give you a valuation as well as a report on the state of the property.
Charges by the mortgage company for implementing the mortgage – getting the mortgage is one thing, but did you know that there are fees associated with the actual process? Think about it this way – there are people who have to be paid to handle your mortgage every step of the way and that cost falls on you. The amount you pay will vary depending on the size of your mortgage.
Prepaid interest or points – we all want to get mortgages at lower interest rates and you can make this happen if you pay a prepaid interest. This usually works out to about 1% of the total value of the mortgage and it could result in higher monthly payments, but remember that you will pay less in the long term because you pay lower interest rates.
Attorney fees – even when you have a great real estate agent it is a god idea to have an attorney come in and look at your contract – remember your real estate agent is looking to make money out of the deal and they may do so at your expense if you are not careful. You should pay an attorney and have him look through all documentation and help you through the closing process.
Recording fees – this may not be necessary depending on where you live, but there some states that require you to pay for the processing and holding of information relating to the purchase of your property.
These are just some of the fees that you can expect to pay as a part of closing costs. Ask your real estate agent to provide you with a list of everything required in your stat