When it comes to home buying, everyone typically focuses on the cost of the house and the mortgage loan. While these costs are seemingly the most important, they aren’t the only expenses you’ll encounter. Some fees must be paid up front, while others can be rolled into your home loan. Below are some of the fees you can expect to pay when buying a home.
The down payment will more than likely be the biggest expense you’ll have. Although there are loans that don’t require a down payment, the majority of homebuyers will put down a minimum of 3% on conventional loans or 3.5% on FHA loans. On a $150,000 home purchase, this would be roughly $4,500 to $5,250. Keep in mind, that the larger the down payment you can afford, the less your monthly mortgage payment will be.
Lender Fees: Origination, Underwriting & Application Fees
What are these fees and why does a homebuyer need to pay them? The origination fee is a lender-based fee and charged for their services in creating the loan. The underwriting fee is another fee often charged by the lender, which covers the cost of preparing the loan and any associated paperwork. The application fee is a lender fee as well and charged for their time in processing a loan request.
There are also a number of fees related to the title of your new home. These charges will typically include a title search, title settlement, title insurance binder, and title insurance. Many times, these fees will be rolled into the mortgage loan. These fees are extremely important in order to protect yourself and the lender to make sure that you are not only receiving marketable title from a seller but in the event that there are issues, you and the lender are protected.
Survey and Appraisal Fees
If an existing survey on the property you are purchasing cannot be obtained, a survey will have to be performed to determine the boundaries of the property. An appraisal on the property is also needed to make sure that the purchase price is in line with the value of the property. A lender will almost always require an appraisal to help justify lending a homebuyer money for a home. This is an upfront fee and costs somewhere between $300 and $400 in the state of South Carolina. An appraisal is not usually necessary for an all cash offer but is usually a good idea to protect a buyer from a bad investment.
State Recording Fees
In South Carolina, there is a fee for recording and holding information regarding a home sale with the county. The fees are $1.85 for each increment of $500 on the price of the home. For example, on a $500,000 home fees would be $1,850. A portion of this goes to the state ($1.30) and a portion (.55) to the county.
Prepaid Taxes & Homeowner’s Insurance
A homebuyer will owe money for property taxes and homeowner’s insurance at the time of closing.
Private Mortgage Insurance (PMI) Depending on what type of loan you have and how much money you are putting down, a homebuyer may be required to obtain PMI. Typically, this is required if you are putting less than 20% down on a conventional loan. This may be required as an upfront mortgage insurance premium as well as a monthly premium once you own the home.
During the closing process, an escrow agent will usually hold any money while the agreement is finalized. These agents charge fees for the handling and disbursement of money.
Additional Inspections: Pest and Mold
In older homes, additional inspections may be needed to check for things such as termites or mold. The inspections are done to protect you as the buyer against any unforeseen issues.
Although typically paid for by the seller, but there may be some rare instances where the fee will come out of your pocket. Make sure you understand your agent’s commission and ask questions if necessary.
If the property your purchasing is in a subdivision with a homeowner’s association, you may have dues that need to be paid at the time of closing. This could also be a prorated cost if the seller has already paid them.
This is a cost you should plan for in order to make sure you are making a wise purchase but won’t show up on any closing statements. The average cost in SC is $360.
In the case where you want to purchase a home warranty, this is a fee that will be charged at closing. A home warranty is a plan purchased by some homeowners to cover the repair or replacement costs of important systems and appliances, such as HVAC, that breakdown over time.
If you live in a coastal or flood-plain area, flood insurance will be required. You may also need to pay for flood determination, certification and monitoring fees.
Although this seems like a lot of fees, not all of them will apply. Some may be waived by the lender or paid for by the seller. It is important to know ahead of time what fees may be required and who is responsible for the payment of them. Before you finalize a purchase, ask for an updated Loan Estimate or Preliminary Closing Disclosure. These forms can help you better prepare for Closing Day.