In the simplest all-cash purchase, the only
fees are ESCROW ($150 + $1.50 per thousand), your first year's FIRE INSURANCE
($250-$300), a fee to the County to record the GRANT DEED ($40) and reimbursing PROPERTY
TAXES the seller has paid in advance.
For purchases involving a loan, a good
rule of thumb is 1 1/2% of the purchase price plus any points on the loan. Here's a
breakdown of the costs:
- A TITLE INSURANCE policy will be required for the
lender, figure on $350 for a $200,000 purchase.
- The are various LENDER FEES that go by various names
such as "Funding fee", "Document prep fee", "Origination
fee", etc. Forget the names, just ask the lender for the bottom line total, or a Good
Faith Estimate.
- POINTS may be charged on your loan if you are going
after a better interest rate.
- If you have an IMPOUND ACCOUNT that allows the lender
to pay your taxes and fire insurance, the account will need some money to start it off.
This will vary depending on where we are in the tax year so that TAXES can be paid.
- If you purchased in a community with a HOMEOWNER'S FEE,
these would also be paid ahead of time.
- The FIRST MONTH'S MORTGAGE PAYMENT is also made in
escrow, or at least a portion of a month. This is so your first payment is not a partial
payment which messes up the bank's bookkeeping. For example, if you close March 15th, you
will pay interest until March 31st in escrow. Your first mortgage payment will be due May
1st which pays for April because mortgage payments are always made in arrears.
- If you purchase with less than 20% down, expect to pay PRIVATE
MORTGAGE INSURANCE, or PMI for short. The portion of the loan over 80% loan to
value is the riskiest part for the lender. With low-down government loans like VA and FHA,
the government insures this part for the lender. For conventional loans, private insurance
companies provide the same service, for a fee. A typical charge is .5-.75% of the loan
amount per year, so divide by 12 to get the monthly figure. You start off the impound
account with 2 months up-front, and then a monthly fee until the loan-to-value reaches
80%. This can happen through appreciation, or from just paying down the mortgage over
time. You have to request the insurance be removed on your own when you feel you have 20%
equity. The insurance company is happy to collect from you forever unless you challenge
it.
Your out-of pocket expenses will be an APPRAISAL
FEE and a CREDIT REPORT fee. Expect around $350 for these services that the
mortgage broker will need to provide for you prior to getting the loan.
Another out-of-pocket is the PHYSICAL INSPECTION. When you purchase a resale home,
you have the right to hire whatever professional inspectors that you want to look the
place over and give you recommendations. This will run from $200-$300, but I always advise
that you do it to avoid surprises later. Also, the inspection report gives us third-party
documentation when we ask the seller for repairs.
The numbers used in this article are approximations, and used for
educational purposes only. |
