costs of buying a home

What Are ALL the Costs of Buying a Home?

What Are the Costs of Buying a Home?

Is this you: You always forget to read the fine print before you pull the trigger on something. That little line on your receipt that says “final sale” or that sticker on your blowdryer that says “may catch on fire” all manage to go unnoticed. And by the time you realize it, it’s too late. Then, and only then, do you discover the true meaning of the words, “deep shit.”

When it comes to your mortgage, however, the consequences of not paying attention can be far worse than an ugly shoe or singed fingers. Therefore, it is crucial that you know exactly what you are getting yourself into before you get into it. This will save you a lot of heartbreak and tears in the long run. 

So, before you dive headfirst into a deal that could affect you for years and years to come, here are the “fine print” costs of being a homeowner:

BEFORE-Purchase Costs:

  • Down Payment (as low as 3%)
    • Keep in mind that the more money you put down, the more equity you’ll have to start with
  • Private Mortgage Insurance (PMI) ONLY if your down payment is less than 20% 
    • 0.5% to 1% of the entire loan amount each year. So, if you borrow $50,000, you could pay as much as $500 a year or $41.67 per month
  • Closing Costs (2 to 5% of the purchase price of the home)
    • Property Transfer Tax – in certain countries this is paid by the seller (like the U.S.), while in others this is paid by the buyer (like Canada). This tax can range from .01% to 3% of the cost of the house
    • Origination Fees – usually between 0.5% and 1% of the loan amount
    • Escrow Deposit – usually around 1-2% of the house, but can go up to as much as 10% of the purchase price of the home
    • Appraisal Fee – usually $300-$500, but may be more depending on the size of the property and how remote it is
    • Inspection Fee – $200-$315, special testing for mold or radon will cost more
    • Survey Fee – the national average in the U.S. is $456, but this will vary depending on the locality. It is $504 in Canada
    • Wire Transfer Fee – $0-$30 per transfer
    • Underwriting Fees – between $400 and $900 depending on lender
    • Document Prep Fee – between $100 and $500. Some states appoint price limits for the “doc fee” so you don’t have to pay as much
    • Discount Points –  $1,000 for every $100,000
    • Credit Report Fee – less than $30
    • Title Insurance – can range from a few hundred to $2000 (one-time fee)
    • Recording Fees – paid to government for recording the sale. It can vary based on how many documents are required. Some agencies charge a flat rate for the first page (i.e. $50) as well as an additional rate per page (i.e. $5 for every page after that) 

AFTER-Purchase Costs:

  • Mortgage Payments – the median monthly mortgage payment, including insurance and taxes, is $1,030 in the U.S. The average mortgage payment, principal and interest only, is $853 per month
  • Homeowners Insurance – about $35 per month for every $100,000 of home value. This will vary from city to city and state to state
  • Property Tax – this depends on your local tax rate and how much your home is worth. If your home is worth $500,000 and your local tax rate is 1.5%, your property taxes would be $7,500 annually (or $625 each month). The amount of your property tax will change based on the assessed value of your house. So, if you do renovations, then your home could be worth more, meaning you will have to pay more in property taxes
  • HOA, Co-op, or Condo Fees
    • HOA – about $200-$300 although this will vary based on the amenities available
    • Co-op Fees – see property tax. This is essentially paying for your share of the property taxes on the entire building plus paying to help maintain the building
    • Condo Fees – between $100 and $700 per month. The average is $331
  • Realtor’s Commission – usually 6% but can go up to 10%. This is paid by the SELLER in most cases
  • Maintenance and Repair Costs – about 1% of the price of the house per year
  • Utilities – about $200 per month. Of course, this will fluctuate depending on how much electricity, heating, and air you use

It’s important that you know what you’re signing up for when you buy a house. Although people may try to oversimplify the costs of purchasing a home, as you can see there are many more costs to consider other than your mortgage payments. However, you shouldn’t allow this to discourage you. Rather, use this information to empower your choices. 

Last, but not least, one often overlooked cost is:

  • Your Effort – the sweat, blood, and tears that you put into financing your house 

Streamline your experience by downloading our free mobile app (Android or Apple iOS) which allows you to browse different programs under different lenders. Instead of going from bank to bank, or broker to broker, give yourself a much needed break by shopping for a mortgage from home. It’s a completely free service that will save you hours of time, not to mention thousands of dollars! For more information, reach out to a team member today.