There’s a lot of money involved in purchasing a home – mortgage primarily because many first-time home buyers tend to focus on securing a mortgage and calculating if they can afford the interest rates. However, they may fail to include other fees, such as closing costs.
According to Zillow, a buyer typically pays an average amount ranging from two to five percent of the home’s purchase price. Essentially, the higher the purchase price is, the higher the total amount of closing cost. Items included in these fees are usually different for each customer, according to a Seattle-based home loan provider. The differences are due to the type of mortgage, location, and other factors.
So before you get to the signing table to complete the documents and finally get your house keys, you should carefully take into account all the fees included. This is so you don’t go short in cash and delay the purchase. One way to prepare for this is by studying the loan estimate which the lender provides. The forecast includes closing costs for the following:
Appraisal Fee
When purchasing a home, the lending company ensures that the property you are buying is worth your budget. An appraiser performs a property assessment. They inspect the home, check amenities and location, compare house prices within the same area, and the recent sales of similar properties in the neighborhood. They can help you determine if the property’s market value is worth more or less than what you’re willing to spend.
The fee costs a couple of hundred dollars, depending on the rate of the appraiser and what kind of evaluation they did. For instance, a drive-by appraiser charges lower than traditional ones because the former does less work. Instead of combing through the property, a drive-by appraiser takes photos of the property and provides a quick estimate of the property value.
Home Inspection
Apart from home appraisal, a home inspection service assesses the physical condition of the house. A trained and certified inspector performs the process: reporting and taking photos of the plumbing, foundation, roof, and electrical system, to name a few.
For termite, asbestos, or radon inspection, the buyer may need to hire another inspector with a specialized certification for this area. According to HomeAdvisor, the average home inspection fee hovers at around $315.
Title Insurance
This is an indemnity policy that protects your financial interests if a problem with the property’s title arises. Possible title issues that could be uncovered during a title search:
- Existing liens (taxes or construction)
- Zoning restrictions
- Document fraud
- Public record errors
There are separate policies for buyers and lenders. On average, the buyer policy costs $834, while for the lender, it costs $544.
Attorney Fees
While a real estate agent has the know-how of property selling or acquiring, it’s still the real estate attorney who is most qualified to perform legal matter. They review all contracts and document each transaction. At times, they may also perform a title search.
You’re not legally required to hire a real estate attorney, but if you are interested in hiring one, the average hourly fee of US attorneys range from $200 to $400.
When purchasing a home, you shouldn’t only look at how much the property is. Instead, you should ask your real estate agent, the seller, lending company, and your attorney about other possible fees. Discuss them in detail. With this, you can have more time to prepare for these fees, so the process is as smooth as it can be.