How Much Should I Expect to Pay on Closing Costs?
Whether you're looking to buy your first home, or trading up to a larger one, there are many costs, on top of the purchase price, that you must figure into your calculation of affordability. These extra fees, such as taxes and other additional costs, could surprise you with an unwanted financial nightmare on closing day if you're not informed and prepared.
Some of these costs are one-time fixed payments, while others represent an ongoing monthly or yearly commitment. Not all of these costs will apply in every situation, however it's better to know about them ahead of time so you can budget properly.
Remember that buying a home is a major milestone. Whether it's your first, second or tenth home, there are many important details to address during the process. The last thing you need is unbudgeted financial obligations cropping up hours before you take possession of your new home.
Read through the following checklist to make sure you're budgeting properly for your next move.
Professional Property Inspection
It is always recommended to have a professional accredited property inspector conduct an inspection of the home before you purchase. Fees vary, so shop around and be sure to ask for qualifications and if they have errors and omissions insurance. Plan for $250-400 depending on inspector and square footage of the home.
Your lending institution may request an appraisal of the property, which would be your responsibility to pay for. Appraisals can vary in price from approximately $175 -$300. Ask the lender for a list of a few appraisers and then contact them and decide on who to hire based on your questions for price and background. Be sure that the appraiser you hire is acceptable to that lender.
Depending on your down payment, your lending institution may decide to include your property taxes in your monthly mortgage payments. If your property taxes are not added to your monthly payments, your lending institution may require annual proof that your taxes have been paid. You can also choose to have them put on a monthly payment plan with the local municipality.
When the home you purchase is a resale (vs. a new home), your lending institution may ask for an updated property survey. The cost for this survey can vary between $200- $700. In most cases this cost is paid by the seller, but check in your contract or ask your Realtor.
Home insurance covers the replacement value of your home (structure and contents). Your lending institution will request proof that you are insured as it protects their investment on the loan. Be sure to get quotes from a few agencies to compare. Using an insurance broker is also a great idea; they shop for you and get you the best quote. Be sure to arrange for insurance before you finalize your condition removal as well. The lender will not fund your mortgage without insurance in place, so make sure you have it organized first.
Any new utility that services your hook up, such as telephone or cable, may require an installation fee.
Even the simplest of home purchases should have a lawyer involved to review all paperwork. Shop around, as rates vary greatly depending on the complexity of the issues and the experience of the lawyer. Also be sure to differentiate between fees and disbursements. Fees are what the lawyer charges you for their time, disbursements are fees to other agencies and expenses that they pay on your behalf and charge back to you. So be sure to compare fees, because most lawyers' disbursements will be approximately the same.
Mortgage Loan Insurance Fee
Depending upon the equity in your home, some mortgages require mortgage loan insurance. This type of insurance will cost you between 0.5% -3.5% of the total amount of the mortgage. Usually payments are made monthly in addition to your mortgage and tax payment by adding the insurance fee onto the balance of the mortgage.
Mortgage Brokers Fee
Sometimes a mortgage broker is entitled to charge you a fee in order to source a lender and organize the financing. However, it pays to shop around because many mortgage brokers will provide their services free to you by having the lending institution absorb the cost. However typically the financial institution pays their fee.
The cost for a professional mover can cost you in the range of: $50-$100/hour for a van and 3 movers, and 10-20% higher during peak demand seasons.
Condos charge monthly fees for the operation of the condo corporation which includes such things as, common utilities, maintenance, professional fees, reserve fund contributions and more. Costs will vary depending on the complex, so be sure to review them in detail.
Water Quality and Quality Certification
If the home you purchased is serviced by a well, you should consider having your water checked by your local experts. Depending upon where you live, determines whether or not a fee is charged, to certify the quantity and quality of the water.
If the town you live in has made local improvements (such as the addition of sewers or sidewalks), this could impact a property's taxes by thousands of dollars.
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