Today I want to talk to you about the costs that are associated with purchasing a home.
Lending regulations continuously change, so even if you have previously owned a home, you may not be aware of some of the new regulations.
The purchase price of the home is what we are able to negotiate between the buyer and the seller. In addition to the price you are paying for the home there will be additional cost involved.
Closing cost can be paid by either the buyer or seller depending on the type of loan. Typically, closing cost and prepaids run between 3 to 4% of the purchase price. If you are buying a $200,000 home, this could mean anywhere between $6,000 – $8,000 that you would need for closing.
There are many buyers that qualify for a loan but don’t have the money for the closing cost. The closing cost has to be paid at closing and cannot be rolled into the loan, so we see a lot of offers that ask the seller to pay all or most of the closing cost/prepaids for the buyer.
Let’s look at some of the cost:
I always recommend a home inspection performed by a licensed home inspector. The cost will run between $250 – $450 depending on the size of the home and is paid by the buyer at the time of the inspection.
A home warranty is a negotiated item in the contract and can either be paid for by the buyer or the seller. The warranty will cover various working systems in the home for the first year and usually runs between $400 – $500.
98% of our buyers obtain a loan from a lender. The lender will require a credit report, an appraisal, a flood search, a termite inspection and an underwriting or processing fee among other things. When purchasing property that is not in a platted subdivision, a survey may be required. The sale or deed and the mortgage (lien) will be recorded at the registers office and a conveyance tax is paid based on the sales price of the property and the loan amount. These are all called “closing cost”.
In addition to closing cost, you have prepaid and escrow items. These include one year of homeowners insurance which is paid in advance, and approximately 2-3 months of insurance premiums and property taxes that are put in escrow to pay these bills when they come due in the future.
These are primarily “buyers” cost. You need to remember that when making your offer, particularly if you are asking the seller to pay some or all of these.
Your closing will be handled by a closing company. A title search will be done to verify that there are no other liens on the property other than what is being paid off from the closing (sellers’ mortgage, etc). They will also make sure the taxes on the property are up to date and no back taxes are due and prepare the closing documents that the buyer and seller will sign to transfer ownership of the property. Their fees are in addition to your lender fees.
It’s easy to see why you need a Realtor to guide you through all of this. Please call me at Prudential Professionals Realty and I’ll be glad to help you thru the buying and selling process.