December 18, 2018
Costs to Buy a Home Beyond the Down Payment—and Why They Are Necessary
Prospective homebuyers are sometimes surprised by the costs and fees that must be paid in addition to the down payment in the process of purchasing a home. But each of these fees purchases a necessary function. A purchase that went through without them would be loaded down with a high likelihood of experiencing all kinds of issues. As such, many of the fee-added services are required by code that the states of Rhode Island, Massachusetts, and Florida have drafted to regulate property transactions.
Among these costs are:
- Mortgage Application Fees and Lender Origination Fees: Lenders perform certain functions in initiating a mortgage application, including running a credit report. In order to cover the cost to them of performing these functions (especially given the large number of man-hours lost to mortgages that end up falling through), they apply fees up front. The application fee can range from below $100 up to $400. Once the loan is in the stream of processing, the upfront Origination Fees are also applied, which cover underwriting and funding. These are generally taken as a percentage of the loan itself, ranging from .5% to 1.5%.
- Cost of Inspection: This will vary from state to state, but there is no call for going through with a purchase of a home without an inspection. Not only does it make clear what issues the property may have, but the discovery of such issues can offer buyers a chance to either negotiate for repairs or lowering of costs, or even to back out of the contract altogether if the issues are serious enough.
- Cost of Appraisal: This step, required by lenders before they will clear a mortgage to be written up, determines the market value of a home. In the case that the amount the seller and buyer have agreed upon is in great excess of this value, the seller may have to lower the asking price in order to make the sale.
- Cost of Survey: The survey, which can run from around $100 to $400, determines the legal boundaries of the property to be purchased, as well as the general dimensions of its structures. The lender will require this, and having a copy of it on hand can prove beneficial in the case of disputes with future neighbors.
- Service Fees for Taxes: This small fee (usually around $50) covers the cost to certify that all tax payments are up to date and applied to the correct property.
- Title Services: These are the fees you pay to us, at Topouzis & Associates, P.C., so that we can provide searches of the public records pertaining to the property in question, curative services to make sure you’re getting title free of defect, and our attorneys’ professional opinions to profess such in the Abstract of Title. We also recommend that you take on the relatively low cost of an Owner’s Policy of Title Insurance, which we provide, to ensure that, should any unlikely problems creep out of the property’s distant past, you are covered. These title service fees also include government filing fees and the cost of having a notary witness your signatures, among other necessary fees.