Planning the budget for your new home is the first and probably most important step before you begin the real estate process. But the only way you can really plan for the full cost of buying a home is by looking at the complete list of everything you’ll need to pay.
Specific amounts depend on the lender you choose and of course the price of your home, but here’s the complete list so you can get a feel for the whole picture. The price of a home is a lot more than just a down payment…
Monthly Payment
First let’s just take a look at the four costs that make up your monthly home budget – Principal, Interest, Taxes and Insurance. This is what the price tag of your home translates to each month.
- Principal – The amount you are borrowing to buy your home.
- Interest – The extra money you pay back for the opportunity to borrow the money to buy your house.
- Taxes – Property taxes on your home. These may be paid monthly or collected as an annual payment.
- Insurance – This may be lumped in with your mortgage payments by your lender. Either way, you must have homeowners insurance; it’s a lender requirement.
- *Private Mortgage Insurance – If your down payment is less than 20% of the purchase price, you will have to pay for Private Mortgage Insurance. This protects your lender in case you default on your loan.
Lender Fees & Closing Costs
The bulk of the “hidden” or unforeseen charges for homebuyers are closing costs and lenders fees. Lender fees are charges you will pay on closing day when you sign off on all of the paperwork.
Closing costs are between 3 and 5% of the purchase price of your home so be prepared. These fees pay all those who are working to get your mortgage, title, inspections, other tasks and paperwork finished. Keep in mind there are some closing costs that sellers pay. Check out the break down of who pays what to get a better idea of what’s in store for you.
- Lender Application fee
- Credit Report fee
- Processing fee
- Underwriting fee
- Escrow fees
- Title Insurance
- Transfer of taxes
- Title company fee
- Survey fee
- Recording fees
- Courier fees
- *Attorney fees – In California we use Realtors/Brokers so there is no legal need for an attorney. However some buyers choose to work with one.
Home Inspection Costs – These fees are paid before closing when you have each individual inspection. They are required by your lender to ensure their investment in you and your new house is sound.
- Pest (aka termite) Inspection
- Home Inspection
- Appraisal fee
Points
A point is equal to 1% of the loan amount. There are two kinds of points, origination points and discount points. Most lenders are will to make no point loans so your extra fees when buying your home are lower. However that means your rate will be higher. Points are generally paid at closing.
- Origination fee – This is charged by the lender to cover the costs of making your loan.
- Discount points – These points are like prepaid interest. The more points you pay, the lower your interest rate will be. You don’t have to pay mortgage points but you may choose to.
If you have more questions about homebuyer fees and charges, your most valuable resource is your agent. Having an expert with you along the way will keep you up to date and ready for anything that comes your way during the home buying process. You can find an agent online or let us match you with a top agent in your area.
Call 888-870-1142 or
Email us at clientservices@firstteam.com
