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Examples of hidden cost of buying a house

When you purchase a home, the additional closing costs can range anywhere from 3 – 5 percent of the home purchase price. There are sometimes referred to as “hidden costs” because they are tagged onto the sale price and will drive your monthly payments up. Many of these costs come in the form of fees that are charged on various pieces of the sale. The good news is that oftentimes the seller will be responsible for many of the fees. However, as the home buyer, there are some costs that you will have to pay.

Here are some of the most common closing costs that are part of buying a home:

Inspection(s) & Appraisal Fees:

An appraisal is generally done before your mortgage is calculated. It is an assessment of the value of the home you want to buy. The fees are determined by the size of the house and the area.

It is not uncommon to have an inspection of the property required. This makes sense as you don’t want to invest in such a huge purchase without first ensuring it is – more or less – in top condition. If the home is new(er), a standard inspection may suffice, but you can always have more specialized inspections done if you want to check for specific things such as mold, termites, etc.

Loan & Mortgage-Related Fees:

A small, loan-related charge that you will run into is the Credit Report fee. Your lender will do a hard-check on your credit in order to ensure that you truly qualify for the loan.

One of the main charges for the mortgage is going to be the Loan Origination Fee. It is how the lenders make their profit and is usually the largest, single closing cost that you’ll have.

Insurance Fees:

Depending on how much you are putting as a down payment, you may be required to purchase additional insurance. Less than 20% of a down payment will often require a Private Mortgage Insurance (PMI) to cover the mortgage lender in the event you cannot pay the loan back.

Additional insurance charges may also include:

– Homeowners insurance

– Homeowner’s Association Fees (HOAs)

– Title insurance

Title Fees:

There is a lot of work that goes into ensuring a house is legally able to be sold. This is where many of the fees and charges end up accumulating. It is important to pay special attention to this and to secure the right attorney or conveyancer for the job.

Depending on how the home was sold in the past (if it was sold at all), there may be title search charges. It is sometimes also optional to have your real estate purchase publically noted in the records for future ease of sale. If nothing else, you will always pay a title transfer fee in order to have the legal paperwork changed over to you as the new homeowner.

Attorney Fees:

Throughout the entire process, there is often an attorney that will help you navigate the web of legal and financial paperwork and ensure things are filed properly and in a timely fashion. Some of the truly ‘hidden charges’ come from their work, although this often doesn’t happen intentionally. An alternative to hiring an attorney is conveyancing online. Oftentimes, you can receive a quote and pay for the processing of the paperwork online, rather than having a local attorney handle the deal.

With some self-education, the hidden costs of buying a house don’t have to be so hidden after all. While some of the charges are fairly standard, there are other pieces that are quite negotiable. Make sure to do your research on the people you will have involved in the home-purchase process to ensure you have the best experience for the best price.