Buying a house, they said. It will be so easy, they said. Until all of a sudden, you have these hidden costs and fees popping up all over the place. I don’t want you surprised at all with any of the costs or fees involved in buying or selling a house but you do need to know that buying a house does require some money.

There are many billboards, signs and advertisements out there touting the you can buy a house with zero down and no money. Do you really want to be a homeowner if you have no money in the bank? That’s a serious question that deserves some serious consideration.

Now, I’m not saying that you need hundreds of thousands of dollars or even tens of thousands of dollars in order to be a homeowner but there are certain costs and fees associated with buying a house that all homeowners, especially first-time homeowners can tend to be surprised about. I want you aware of everything and doing your homework, including reading this blog post, will put you in a better position financially.

Here are some hidden costs to buying a home.

Out-of-pocket home inspection costs.

This is one of the expenses that will not be included in your closing costs. Unless your real estate agent or financial lender has done some creative consolidating, chances are you’ll need to pay for your home inspection out-of-pocket. This means you’ll need to write a check or give a credit card to the home inspector while they are there before or right after the home inspection. Home inspections tend to run anywhere from $350-$800. On average is about $400. If you can’t afford a home inspection out-of-pocket, you probably should not be buying a house. The home inspection is a vital part of the home buying process and not understanding everything you can about the home from a professional’s point of view could lead to some costly mistakes in the future. Make sure you have this money set aside for the home inspection.

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The appraisal fee.

When borrowing money your lender will want to make sure that the home you are purchasing is worth the amount you are borrowing, which is why they’ll need to order an appraisal that you’ll need to pay for. The lender will typically hire an independent certified appraiser to assess the property value of the home. It will document varies features that make the home valuable and they can typically run between $250 and $600. This upfront fee will be charged directly to the borrower by the lender and may or may not be included in the closing costs.

Escrow fees.

Some lenders will require that an escrow account be set up in conjunction with a mortgage loan agreement. This will house money to pay ongoing property related expenses on the homeowners behalf including homeowners insurance, private mortgage insurance and property taxes. There also may be an additional deposit required at closing for this account. Be sure to check with your lender or your real estate agent about these additional fees.

Potential survey costs.

Not all homes will require a survey but it may be required so everyone knows exactly where your property’s boundaries are. This could be several hundred dollars but again, not required however, you will be paid directly to the surveyor.

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Earnest money deposit.

When you first make an offer on a home you’ll need to write a check or money order for an earnest money deposit. This holds the property as the first right of refusal to buy the home. This could be anywhere from 1% to 5% of the purchase price of the home so this is a good chunk of money that could be several thousand dollars. This will go toward your down payment at closing. This money will not be deposited until mutual agreement is secured on the purchase and sale contract.

Closing costs.

When you finalize the sale on your new property closing costs will include a variety of courier fees, escrow and title company fees, appraisals, lending fees, points etc. and may or may not include some of the previous points as well. This could be anywhere from $5000-$20,000 based on the price of the home. This can be rolled into the cost of the home if the property can bear the value however, talk to your lender about this so that you’re not stuck with a $10,000 bill that you didn’t know about.

Buying a home should be fun but understanding all of the details about the transaction and the lending practices will help you be better prepared for the entire process. For more information or to get started or to answer any questions you might have about homebuying in the Tri-Valley area contact my office today.

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