Budgeting for a new home is an important first step to beginning the process of purchasing a home. However, many first time homebuyers are often unclear on all of the costs that go into buying a new home.
To help you prepare for your new home purchase, I have put together a list of homebuyer fees.
There are four major costs that make up a homeowner’s monthly payment. The first expense is the principal. This is the amount of money you are borrowing to buy your home. Interest is the extra money you are paying back to the lender for the original loan amount. Taxes are the property fees on your home. These can typically be paid monthly, or as an annual payment.
While these are the common monthly payments, there may be more depending on your situation. For example, if your down payment is less than 20% of the purchase price, you may have to pay for private mortgage insurance. This safeguards the lender in case you default on your loan.
Lender Fees and Closing Costs
Lender fees are the money you will pay on the day you close on the house, and sign all of the paperwork. Closing costs typically range between 3% and 5% of the purchase price of the home. The closing costs are fees that pay for all of the people working to get you your mortgage, inspections, title, and other paperwork. Not all of the closing costs fall on the buyer, however. The seller also is responsible for some of the costs.
Home Inspection Costs
These fees are paid before you close on the home, at the time of the inspection. Home inspections are required by the lender to help safeguard their investment, and ensure that the house is safe and up to code. These costs include the home inspection itself, as well as the appraisal fee and pest inspection.
Points are typically paid at closing, and represent 1% of the total loan amount. There are two different kinds of points: origination fee and discount points. Origination fees are charged by the lender, and cover the cost of making you the loan. Discount points are similar to prepaid interest. The more points you pay upfront, the lower your interest rate will be. Some lenders may be able to provide no-point loans, which will make your fees when buying the home lower.
If you have more questions about the costs that go into buying a home, I am here to help. As the #1 realtor in Encinitas, I can help you understand the expenses of buying your first home, and help you find the home of your dreams.