If you’re contemplating it, or in the midst of buying your first home, you probably already know it’s a big undertaking. There’s a lot to think about, particularly when it comes to financial decisions. A home is likely one of the biggest purchases you’ll ever make.
You have to look beyond the price of the home itself, as well. When you’re budgeting to buy a home, there are hidden costs you may not be aware of, and they can significantly add to what you’re paying overall.
The following are some hidden home-buying costs to make sure you keep in mind.
Loan Origination Fee
When you get a mortgage, paying the loan origination fee is essentially paying your lender for their portion of the work that went into the process. You have to pay this upfront, and it varies depending on the lender. Usually, the loan origination fee is anywhere from 0.5% to 1.5% of your total mortgage.
When you find a home you like and you make an offer, the seller may ask you for earnest money. Earnest money is somewhat like a security deposit you would pay as a renter. It shows the seller that you’re serious with your offer, and you aren’t going to back out on them. This may range from $500 to $1000.
You will either get the money back, or it’ll go toward the purchase price assuming your financing goes through, and you sign paperwork with the seller.
An appraisal report is something your lender needs to see to make sure you aren’t overpaying for a home Appraisal fees are usually a couple of hundred dollars.
The home inspection is different from the appraisal. Home inspections help you make sure that you’re not purchasing a home that’s going to come wit ha lot of unexpected problems. The cost of an inspection is anywhere from $300 to $500 in most cases, and you have to pay it even if you don’t end up purchasing the home.
Closing costs can be anywhere from 2% to 5% of the purchase price of your home, which depending on how much a home is that you’re buying, can get expensive. Closing costs can include lender fees and appraisal fees, which were already mentioned.
Closing costs might have some other things added in as well, however. These can include title and attorney fees, which pay for the costs of transferring the deed to the home. Escrow fees and interest may be in these costs too.
Private Mortgage Insurance (PMI)
If you don’t have enough money saved for a down payment of around 20%, you may need to include private mortgage insurance in your buying costs. Private mortgage insurance or PMI is something lenders will require you to pay if you don’t have 20% equity in a home. It’s a form of protection for your lender. Once you reach the point where you have 20% equity in your home, you won’t be charged PMI anymore.
Luckily moving costs are one-time costs, but still a cost nonetheless. Movers can cost thousands of dollars, so do some comparison shopping before you make a decision and include this in your final budget to buy a home as well.
These costs don’t take into account things like homeowner’s insurance and property taxes. The additional costs shouldn’t make you afraid to purchase your first home—instead, you should be proactive and prepared as far as how you’ll handle these costs, so you aren’t blindsided.
Make your home buying process as easy as possible for yourself by working with a top realtor. EffectiveAgents can help you find the perfect realtor for your needs.