Purchasing a home is a stressful and somewhat difficult process. Unexpected home buying fees can add to the complexity of the situation and create a bigger financial burden than was originally planned for. That’s why it’s important to prepare for these potential fees before reaching the closing table.
- Inspection and Appraisal Fees – Before a lender will cut a check for the purchase price of a home, they first want to know that the value and condition of the property that is being bought. It is typically up to the buyer to hire an inspector and appraiser to assess the home and look for any major damage or areas of concern that might disqualify the property from a standard loan.
- Loan Application and Origination Fees – Depending on the lender, it is possible that the buyer is going to be responsible for either a loan application or origination fee, or both. The application fee is usually a small set amount for the processing of the application and the credit check. The origination fee is usually 1-3% of the total loan value that is being applied for.
- Title Search and Examination – In addition to the condition of the property itself, it is also important to research the property’s title and make sure that it is clear and eligible to be transferred to the buyer upon closing. In some cases there may be liens or other factors affecting the title that will need to be resolved prior to purchasing the property.
- Title Insurance – Even after the title has been inspected, there is still some chance that it could be subject to certain defects or liens that have gone unrecorded for whatever reason. As a result, most mortgage lenders require title insurance to cover the chances that the title will be disputed in the future, and is typically based on the purchase price of the home.
- Government Processing Fees – Another source of unexpected home buying fees is the cost of having the title information recorded with the local government. These county offices usually charge a small set fee for clearing and transferring the title in their books.
- Attorney Fees – Lastly, the attorney representing the buyer or the title company itself may charge a fee for their services in performing the transfer service. This fee covers their part in structuring the transaction and seeing it through to completion.
While some home buying fees are relatively small on their own, there are so many variables that come into play that getting hit by multiple fees at once can be overwhelming. Plus, fees such as the origination fee can come out to several thousand dollars based on the purchase price of the home, and this can throw a well budgeted purchase into a tail spin if the buyer is not prepared. Taking time to figure out which fees will be a part of the transaction and estimating those costs in advance is the best way to get through closing successfully without getting caught off guard.