Whether you're looking to buy your first home, or trading up to a larger one, there are many costs – on top of the purchase price – that you must figure into your calculation of affordability. These extra fees, such as taxes and other additional costs, could surprise you with an unwanted financial nightmare on closing day if you're not informed and prepared.
Some of these costs are one-time fixed payments, while others represent an ongoing monthly or yearly commitment. Not all of these costs will apply in every situation, however, it's better to know about them ahead of time so you can budget properly.
Remember that buying a home is a major milestone. Whether it's your first, second or tenth home, there are many important details to address during the process. The last thing you need is unbudgeted financial obligations cropping up hours before you take possession of your new home.
Read through the following checklist to make sure you're budgeting properly for your next move.
Appraisal Fee: Your lending institution may request an appraisal of the property, which would be your responsibility to pay for. Appraisals can vary in price from approximately $175 -$300.
Property Tax: Depending on your down payment, your lending institution may decide to include your property taxes in your monthly mortgage payments. If your property taxes are not added to your monthly payments, your lending institution may require annual proof that your taxes have been paid.
Survey Fee: When the home you purchase is a resale (vs. a new home), your lending institution may ask for an updated property survey. The cost for this survey can vary between $700- $1,000.
Property Insurance: Home insurance covers the replacement value of your home (structure and contents). Your lending institution will request proof that you are insured as it protects their investment on the loan.
Legal Fees: Even the simplest of home purchases should have a lawyer involved to review all paperwork. Shop around, as rates vary greatly depending on the complexity of the issues and the experience of the lawyer.
Credit Report Fee: This fee covers the cost of the credit report requested by the lender. This too may already have been paid when you applied for your loan.
Moving Costs: The cost for a professional mover can cost you in the range of: $50-$100/hour for a van and 3 movers, and 10-20% higher during peak demand seasons.
Mortgage Brokers Fee: A mortgage broker is entitled to charge you a fee in order to source a lender and organize the financing. However, it pays to shop around because many mortgage brokers will provide their services free to you by having the lending institution absorb the cost.
Loan Origination Fee: This fee covers the lender's loan-processing costs. The fee is typically one percent of the total mortgage.
Loan Discount: You will pay this one-time charge if you have chosen to pay points to lower your interest rate. Each point you purchase equals one percent of the total loan.
Title Insurance Fees: These fees generally include costs for the title search, title examination, title insurance, document preparation and other miscellaneous title fees.
PMI Premium: Depending upon the equity in your home, some mortgages require mortgage loan insurance. This type of insurance will cost you between 0.5% -3.5% of the total amount of the mortgage. Usually payments are made monthly in addition to your mortgage and tax payment.
Water Quality and Quality Certification: If the home you purchased is serviced by a well, you should consider having your water checked by your local experts. Depending upon where you live, determines whether or not a fee is charged, to certify the quantity and quality of the water.
Local Improvements: If the town you live in has made local improvements (such as the addition of sewers or sidewalks), this could impact a property's taxes by thousands of dollars.
Maintenance Fees: Condos charge monthly fees for common area maintenance such as grounds keeping and carpet cleaning in hallways. Costs will vary depending on the building.
Prepaid Interest Fee: This fee covers the interest payment from the date you purchases the home to the date of your first mortgage payment. Generally, if you buy a home early in the month, the prepaid interest fee will be substantially higher than if you buy it towards the end of the month.
Escrow Accounts: In locations where escrow accounts are common, a mortgage lender will usually start an account that holds funds for future annual property taxes and home insurance. At least one year advance plus two months worth of homeowner's insurance premium will be collected. In addition, taxes equal approximately to two months in excess of the number of months that have elapsed in the year are paid at closing. (If six months have passed, eight months of taxes will be collected.)
Land Transfer Tax: This tax is applied whenever property changes hands and the amount that is applied can vary.
Recording Fees and transfer taxes - Service Charges: Any new utility that services your hook up, such as telephone or cable, may require an installation fee.
Make sure you consult a real estate professional in your area to find out which fees--and how much--you will be expected to pay during the closing of you prospective home. Keep in mind that you can negotiate these costs with the seller during the offering stage. In some instances, the seller might even agree to pay all of the settlement costs.