Financing costs when buying a property

It is very important to know, when you’re buying a financed home, which costs are involved in the financing of it.

Lenders have a series of requirements that need to be paid for by buyers.

Financial institutions need to make sure that the home they are financing is an appropriate property and can serve its purpose.

Therefore lenders require most of the times that buyers do a home inspection before the closing. The home inspection costs can run from $200-$1,000 or more depending on the size of the property and what kind of inspection and requires.

Most lenders also require a survey to be made on the property. The survey gives a professional idea of the size of the property and where the lengths boundaries are. The cost of the survey is also several hundreds of dollars.

Apart from the inspection and the survey you can expect that you will be paying for the taxes that correspond to the year when you’re buying the property. Taxes are usually paid in advance of closing.

Lenders commonly hold in escrow account with the taxes and the insurance cost for at least one year advance. Sometimes even maintenance costs in condo associations are included in that escrow account too. The good thing about it is that you don’t have to worry about getting to pay taxes, insurance and Association dues on time.

At the moment of closing there are other additional costs and fees that you will need to take care of.

  • Application fee: commonly charged by lenders to pay for the processing of mortgage application. Usually it’s can be negotiated. ($100-350)
  • Lenders origination fee: charged by the lender for lending of the monies. Depending on your credit history and the importance of your business, lenders would consider withdrawing this fee. In case you’re working with a mortgage broker this origination fee is usually part of their commission. (0.75%-2% of the loan amount)
  • Appraisal: this is a requirement by the lender. A certified appraiser that acts on behalf of the lender determines the market value of the property. ($200-650)
  • Credit report: lenders require a credit report to be done on the buyers that have a credit history in the United States. ($25-50)
  • Title insurance: is a policy that covers the financial losses that may come up because of defects in the title to real property. (Approx. $575 per $100,000 of value insured or its proportion)
  • Title search: is a search that retrieves documents evidencing events in the history of the real property.
  • Lien search: It reviews liens and other possible entitlements on the property.
  • Government Recording fee: is the fee charged by government for recording the deed, mortgage and loan documents.
  • City and state tax stamps: are the taxes to be paid on the mortgage.
  • Other services fees: related to other services hired by buyer like attorneys or accountants.

Lenders should be able to give you a good idea on the actual lending costs through a good faith estimate (GFE). Do not hesitate in asking for one in order to have a clearer idea on what you are getting into.