Home Buying a Home Uncovering The Fees Associated With Buying a Home

Uncovering The Fees Associated With Buying a Home

by Eric Rothman
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As part of the loan process and closing costs, there may be some fees some homebuyers might not be aware of, especially if you are a first-time homebuyer.

For example, traditionally homebuyers have paid their agent a 2.5-3% commission on the purchase price of a home. Closing costs generally breakdown to between two and five percent of a home’s value, this is on top of the total fees paid to agents.

When you add up the buyer’s agent and the seller’s agent fees together they total 5-6% of the purchase price. With REX, that fee is only 2-2.5% for the total transaction so everyone saves a lot of money. Here is a list of the other costs that can be associated with buying a property:

Application fee: Some lenders charge buyers an application fee to process an application for a loan. Generally, this is several hundred dollars, although sometimes there is no fee at all.

Appraisal fee: Mortgage lenders require an appraisal before signing off on a loan. The fee, paid by the buyer, can run anywhere from $200 to $500 and will vary by property type, square footage, and location.

Attorney’s fee: At REX, the attorney’s fees are covered in the cost of the home.

California Documentary Transfer Tax: This is a tax imposed by the county or city on the sale of a property. The buyer or seller may pay (or there may be a split). The county transfer tax is $1.10 per $1,000; additionally, some cities collect their own tax.

Commission: REX homebuyers pay no fees because REX sellers pay a 2-2.5% fee on the total sale price of the home directly to REX.

Credit report: The credit report fee may be combined by a lender into the application fee. Each loan applicant will need a report. The fee is usually not more than $30 per applicant.

Discount points: In exchange for a lower interest rate, a buyer can pay a fee to reduce the amount of the mortgage. One point is equal to one percent of the loan amount.

Document preparation fee: Lenders sometimes charge this fee to the borrower for the preparation of documents related to the mortgage. This fee, which is usually about $200, maybe negotiable.

Escrow settlement fee: A neutral third party escrow company will be used to hold money in good faith and complete all of the transfer documents, including working with the lender and the paperwork needed for the lender to fund the loan.  Generally, the cost for this service is less than half a percent of the purchase price.

Flood certification fee: You will need to determine if you home is in a flood zone before your loan closes, and the fee usually ranges from $15 to $25. If the home is in a flood plain, you will need to buy flood insurance, paid separately.

Home inspection fee: A home inspection can range from $200-$1,000, depending on the size of the home and the thoroughness of the inspection. While not usually required, it is highly recommended that both buyer and seller obtain one.

Homeowner’s association fees: Not all homes will have homeowner’s association fees, but it’s best to ask so there are no surprises. These costs depend on the amenities associated with the development and are usually paid monthly. At closing, a year’s worth of dues is usually paid.

Homeowner’s insurance: You’ll typically be required to buy enough insurance to cover the amount of your mortgage, but most experts agree that’s not enough. You’ll want to make sure the amount also covers your down payment and is equal to the cost to replace the home and all your possessions within the home. Often, anywhere from two months to an entire year’s worth of insurance is due at closing.

Interest: Lenders usually require a buyer pay the interest that will accrue on their loan between settlement and the first mortgage payment at closing.

Lender fees: This is the umbrella under which many closing costs fall under including document preparation, underwriting, and origination. Third-party fees are often included as well, such as the appraisal fee, credit report fee, flood certification fee, survey fee, tax service fee, and title insurance fee.

Loan origination fee: This fee goes to the lender to cover costs. Generally, this fee is at least one percent of the total loan, although it may be more. These are also called points, and one point equals one percent of the loan. This fee is sometimes negotiable.

Mortgage insurance application fee (PMI): Borrowers who put down less than 20% of a loan amount are required to carry Private Mortgage Insurance until they’ve paid 20% equity. There can be a fee for application processing.

Mortgage insurance premium: Often, buyers will have to front anywhere from two months to one year to the entire cost of the premium throughout the life of the loan at closing.

Natural disaster or hazard insurance (earthquake, flood, tornado etc) premium: Depending on where you live, you may need insurance to cover an earthquake, flood (see above) or tornado damage. If it’s necessary, you’ll likely pay the first year premium up-front at closing.

Notary: A licensed notary public will usually need to be present at closing. Most are mobile and charges can range from $10-$25.

Property taxes: At least two months of property tax payments into an escrow account are usually required from the buyer at closing.

Recording fee: The city or county in which you are buying your home will usually charge a fee for recording public land records. It varies by area.

Survey fee: You’ll usually need to pay for a land survey to verify property lines and to make sure walls and fences are in the correct place. Surveys tend to start at around $350.

Title search fee: Before you buy your home, you will need to pay a title company to research property records to make sure no one else holds the deed to the property in question. Depending on the complexity of the search, it may cost between $150 and $500.

Title insurance: There are two types of title insurance, lender’s policy title insurance and owner’s policy title insurance. Owner’s policy title insurance protects you, as the new homeowner, from any claims on the property. Lender’s policy title insurance, or loan policy, protects the lender from claims on the property.

Wood destroying pest inspection and allocation of costs: Many lenders require that homes receive an inspection for termites and other wood-destroying pests. These inspections usually cost about $150.

Underwriting fee: The buyer pays the lender a fee of approximately $400 to $900 to cover the cost of evaluating a mortgage loan application. If the loan does not close, the fee is generally not paid.

Interested in buying or selling a home? We would love to help!

Give us a call at 855-205-0599

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