First-time home buyers who are unfamiliar with the mortgage process should be on the lookout for those pesky unknown or hidden fees. There are far more costs and fees associated with the home buying and mortgage process than the price of the home or the down payment. Here are five little-known costs to watch out for so they do not catch you by surprise at the closing table.
It is common knowledge that you must pay taxes on your new home. However, many first-time home buyers are unaware that they need to prepay taxes in order to close the deal. If your down payment is less than 20 percent, most mortgage companies require you to set up an escrow account for taxes and insurance. In addition, you may need to pay several months’ worth of taxes at the closing table. Ask professional realtors such as Exit Lakes Realty Premier about taxes and escrow accounts.
Home Inspection Costs
Very few first-time home buyers realize that many mortgage insurers require a home inspection before closing the sale. The fee to have a professional inspect the home can run you several hundred dollars. On a few occasions, mortgage insurers do not require a home inspection. Therefore, you should talk with your realtor beforehand about inspection requirements.
Credit Report Fee
The lender that approved your financing paid for your credit report as part of the qualification process. The lender will recoup that money by including the fee in your closing costs. Many first-time home buyers are under the impression that the lenders cover the cost of the credit reports.
Again, the lender in most cases pays for a certified appraiser to fully evaluate the home and place a market value on the property. The lender will then add the cost of the appraisal into the final closing costs. The evaluation includes finding comparable sales in the neighborhood and assessing any features or characteristics that increase the value of the home.
Upkeep and Repairs
New homeowners are responsible for all repairs and maintenance once they receive the keys to the door. Many new homeowners rented before their first purchase and are used to landlords and property managers covering all the repairs. The mortgage company certainly will not pay for maintenance and repairs, so it is up to you.
The costs and fees listed are certainly not as transparent as other costs such as the down payment or the commissions paid to the realtor. However, the fees are legal and you can easily find them on the initial good faith estimate provided by your loan officer or directly from the lender. Ask plenty of questions before you sign the final closing documents to avoid any major surprises at the closing table.