Closing costs: What to expect

It might surprise you to find out that there are many fees associated with buying a home. Often future homeowners are shocked at the added costs of buying a home because of the varied closing fees for things such as document preparation and other types of administration fees. Having an expectation of the potential closing cost associated with buying your home will aid you to budget your finances appropriately, and help you determine early on what you can realistically afford to pay for a home.

Lenders fees vary from state to state. However, you can expect certain fees to be tacked onto your loan. Make sure to check out with your lender the different costs that will be applied to your purchase for your home. Typically you will be required to pay these fees at the closing.

• Processing Fees – Monies paid to begin the processing of the loan. Costs run can run from a few hundred dollars to a couple of thousand.
• Document Preparation Fees – A fee for the write up of your loan. Costs run approximately from $300 – 400 dollars.
• Review Appraisal Fees – Cost vary accordingly, but you can expect a payment of $200.00 dollars on average.
• Wire Fees – Electronic payment form for funding your loan and fees fluctuate.

You need to be aware that there are other fees that will be incurred when purchasing a home. Some of the fees associated with home buying are advanced or one time fees and others are fees that will have to be paid again. Check out some of the other fees that you will be required to pay when purchasing your home.

• Loan Origination Fees – Fees based on a point system for your mortgage. Usually if you are able to pay more in a down payment, your points will be lower, thereby saving you costs on a higher interest rate.
• Credit Report and Underwriting Fees – Depending on the finical institution running a credit report the fees will vary, but expect to pay for a detailed report on your credit history. Costs are typically around $100.00. Costs for underwriting a loan can be on the costly side – running from several hundred to a thousand dollars.
• Property Tax Fees – Independent fees paid yearly to an outside representative to ensure payment of property taxes. Property tax fees can be in a special escrow account which can be required by the lending institution before you purchase a home.
• Appraisal Fees – Prices vary on home price and geographic area. Independent appraisal fees usually run from $350.00 and upwards.
• Homeowner Insurance Fees – Dependent on the financial institution a six month to one year payment for home insurance is usually required.

It’s easy to see why most first time home buyers believe that there couldn’t possibly be any more fees to consider when purchasing their home. However, there are other fees that they might not realize that they will have to pay to be able to move into their dream home. Other fees include title clearance fees which insure that the title is properly titled, and cleared to and for them. Also, notary fees for the different documents associated with home buying is necessary, it makes the documents a legal and viable document. Costs to have your documents notarized are not that expensive, but it is another fee that you must consider. Fees for recording your documents at your local courthouse are another area of cost; again they are not that costly.

This list of fees is certainly not an all inclusive list, other costs can be found when dealing with mortgage companies, or federally sponsored programs such as HUD (Housing and Urban Development). The best defense against rising cost, and subsequently defaulted loans and ruined credit, is to check out as much as you can about home owning in general, and then to wisely evaluated your economic portfolio. Consider other factors outside of closing costs, such as long term savings and investments that will need to be managed once you retire.  Never jump too quickly into the responsibility of a long term financial commitment such as home ownership unless you’re sure that you can meet it.