Mortgage Closing Costs
When you buy a house, there are extra costs besides your basic mortgage fees. These fees cover things like loan approval and paperwork. It’s important to plan for these expenses because many people help you during the home-buying process, and they need to be paid for their services.
Common Extra Costs When Buying a Home
Here are some of the common out-of-pocket expenses you might need to pay for upfront:
Home Inspection
A home inspection is one of the most important steps when buying a house. The inspector checks the home to make sure everything works as it should. This small cost can save you from big problems later.
Condo Questionnaire Fees
If you’re buying a condo, your lender might ask for details about the building. This can take up to 30 days and may cost between $0 and $300.
Well and Septic Certifications
If the house has a well or septic system, you’ll need to make sure they are working properly. This is important for your safety and health.
Survey
A survey shows the exact borders of your property. Not all homes need one, but if you do, the cost will depend on how large the property is.
Appraisal
An appraisal is when an expert estimates how much your house is worth. This is usually required by lenders, and you might need to pay for it upfront. If you switch lenders, you might even need more than one appraisal.
Plan for These Costs
You may not need all of these services, but they can add up to over $1,000. Talk to your real estate agent and lender about what to expect. Remember, you must pay these costs even if the home sale doesn’t go through.
FAQs About Home Buying Costs
What Happens to My Earnest Money?
Earnest money is a deposit that shows you’re serious about buying a house. It’s held by a third party until the deal is done. This money usually goes toward your down payment or closing costs. Make sure you have enough funds in your account because the money might be cashed as soon as you give it.
Do I Pay My Real Estate Agent?
No, buyers usually don’t pay their real estate agent. The seller pays the agents involved in the sale. A good buyer’s agent can help you save money by spotting issues, negotiating better prices, and making sure everything in the contract is clear.
What Are Mortgage Points?
Mortgage points are fees you pay to lower your interest rate. One point equals 1% of your loan amount. For example, one point on a $100,000 loan would cost $1,000. Paying points upfront can save you money in the long run if you stay in the home for a long time.
Here’s how to calculate:
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Cost of points ÷ monthly savings = months to break even.
If you’ll keep the loan longer than the break-even point, paying points could be a smart choice.
Are Mortgage Points Tax Deductible?
Yes, in many cases. Be sure to check with your tax advisor to know if you qualify.
Can I Pay More Points to Get a Lower Rate?
Yes, you can pay more points to reduce your interest rate further. Typically, one point lowers your interest rate by about 0.25% on a 30-year loan.
What Is a “No-Cost” Loan?
A “no-cost” loan means you don’t pay fees upfront, but you’ll have a higher interest rate. This option works best if you don’t plan to stay in the home for a long time.