"Hidden Fees" When Buying a Home
Purchasing a home is arguably one of the biggest financial decisions you will make in your lifetime. As you start your hunt, don't forget there will be other costs associated with your purchase then the price of the home, that many first time home buyers forget about. Here are 5 fees to keep in mind as you begin to budget.
Home inspection. This is a crucial step in the home buying process. The findings that come from the inspection can help you negotiate price and repairs. Generally, you can expect to pay between $300 to $500 depending on the home and the location. If the home has a pool or septic, or a crawl space, sometimes there is additional charges. Ask for samples of their reports before hiring, so you can know what to expect in terms of their details.
Option Fee. This is a negotiated amount (often $100) paid to the seller to "hold" the home and provide you with the option to back out of the contract losing only the $100 within a set period of time (ie 10 days). Leaving a contract past option can result in loss of Earnest Money and any other monies paid.
Earnest Money. This is a typically a 1% of the homes purchase price that is paid to title to "hold" the home while the contract is negotiated. Often, it can be credited towards the closing costs, and can be refunded if the inspection does not go as planned.
Title services. Title services encompass the transfer of the title from the seller and a thorough search of the property’s records to ensure to no one will pop up with a claim to the property. Additionally, you may need to buy title insurance which will protect the lender or your investment in the home. (This amount is usually wrapped up in your closing costs)
Appraisal fee. Though the course of purchase process, your lender will require an appraisal of the property you have selected to ensure what you are paying matches what it is worth. This will be conducted by a licensed third-party company and the cost can land anywhere between $300 and $1,000, depending on the size of the home.
HOA fees. Many communities have a homeowners’ association that enforces monthly fees. This money is used for general maintenance and updates to areas like pools, parks, and more. If you are choosing a home in an area with an HOA be sure to ask for the fees required and the documents outlining the roles and responsibilities.
Taxes. The taxes each buyer pays at the closing table differ, but it is not uncommon for it to be up to two months’ worth of county and city property taxes. Additionally, there may be taxes for the transfer of the home title.