You’ve carefully planned your budget to buy a house. You may have checked out the prices for homes in your preferred neighborhood. While this is a great start, you also want to avoid being surprised by these often unexpected costs that are involved with many home purchases.
Home Inspections and Appraisals
Many lenders require you to get your home inspected before you sign the final papers. This inspection checks for major issues that impact the value of the home. For instance, a house with faulty electrical wiring poses a fire risk. A home appraisal also lets the lender know that the home is actually worth the selling price.
These expenses often seem to be the most mysterious for first-time homebuyers. This is because they can vary according to the circumstances surrounding the home purchase. In most cases, you can expect to pay lender and title or attorney fees. You may also need to cover the cost of the interest that accrues between the time of closing and the beginning of the next month.
On average, you can expect to pay about two to three percent of your home’s value in closing costs, and even the small fees for notaries and other necessities add up. There are usually several options to cover these expenses. Some of these fees can be worked into seller concessions. Others may be rolled into your total loan. We can help you figure out which strategy for covering these costs is best for you.
This expense can be lumped in with your closing costs, but it is worth exploring in greater detail. An escrow account contains a portion of the property taxes and insurance that is expected to be due for your house over a period of time. Lenders tend to require you to pay anywhere from three months to a full year of these expected payments.
An escrow account benefits you by using a portion of your mortgage payments to cover the insurance and taxes. Certain types of loans, such as an FHA loan, typically require you to have an escrow account.
Property taxes are easy to overlook, since they tend to get added to your mortgage payments as part of the escrow account. However, you need to think about this expense if you are not setting up an escrow fund. You will also need to think about any potential increases that could occur with the valuation of your property over the next year or two. In some cases, supplemental taxes can be assessed that you need to cover after your home purchase.
Private Mortgage Insurance
Lenders require you to pay private mortgage insurance (PMI) whenever you don’t have enough of a down payment to give you at least 20% equity in your home. You may be eligible for a loan that allows you to put less money down while still avoiding PMI. You can also drop this insurance once you achieve enough equity in your home to satisfy the lender’s requirements.
There are many factors that influence the potential additional fees that you face when you buy a house. In some cases, we can help you overcome extra expenses through seller concessions and special types of loans. Remember to explore all of your options for offsetting hidden costs, so that you can maximize the home you can buy with your budget.
Jimmy Vercellino is an experienced Phoenix mortgage lender. He and his team work hard to provide a timely, efficient and excellent home loan process for buyers. As a loan specialist, Jimmy manages the entire process for his clients, making the home buying experience a pleasure instead of filled with stress.
The Vercellino team operates a boutique-style mortgage branch with a specific culture centered around “serving families”. He is able to originate loans in 46 states and his bank maintains a full line of conventional, government (FHA and VA) and jumbo loan products. He has received several loan production awards including National Top 1% Mortgage Broker Award.