As you know, buying a home is a big investment. It’ll change your personal and financial lives forever, so you can’t afford to make any mistakes.
Unless you’re paying for your home in cash — which is something that most people can’t afford — you’ll soon find yourself shopping for a mortgage.
During your home search, it’s easy to get so caught up on the sales price that you overlook other important financial details. This includes mortgage fees and related expenses that are sure to affect your decision making.
Here is a list of the most common mortgage fees and expenses:
- Appraisal fees: You’ll need an appraisal, which provides an estimated value of the home you’re buying. This impacts how much you can borrow, so don’t expect to move through the process without one. An appraisal typically costs somewhere in the $500 to $1,000 range.
- Home inspection fee: While not required, a home inspection provides a sound understanding of the overall condition of the home. Expect to pay somewhere around $500 for an inspection.
- Credit report fee: At approximately $50 per credit report, this isn’t the most expensive mortgage fee. Some lenders cover this fee on behalf of the borrower, so check on this early in the process.
- Document preparation fee: These vary by lender, but are usually in the $200 range.
- HOA fees: If you’re buying a home that is part of an HOA, there are some fees that you’ll have to pay upfront.
- Loan origination fee: Mortgage lenders generally charge one percent of the total loan amount for the origination fee. So, if you borrow $500,000, this fee will be $5,000.
- Title fees: This takes into consideration expenses such as a title search fee and transfer fee.
- Private mortgage insurance: Unless you put down a minimum of 20 percent, your lender will require you to pay private mortgage insurance. This is a recurring fee, but you can eliminate it from your payment once you gain 20 percent of equity in your home.
- Taxes: Often the biggest prepaid expense when buying a home, you’re responsible for things such as county tax, city tax, state tax, and school tax among others.
It’s good to discuss these mortgage fees with your lender as soon as possible. Doing so gives you a clear understanding of how much money you need to close on your home.
Mortgage fees will vary from one lender to the next, so don’t hesitate to shop around with these numbers in mind.