This information is provided by firstmnhome.com
When deciding to purchase a home, the first thing a family needs to consider is financing. Where will you obtain the money, and how much can you afford to borrow? The rule of thumb states you can afford a home that costs about 2.5 times your annual salary. However, what is can afford is also affected by other circumstances. First, what are your other bills? Be sure to include utilities, doctor bills, insurance, groceries, tuition for children, etc.
Second, do you have money for a down payment? Generally a down payment is 3%. Some finance programs allow you to finance the entire amount of the loan with no money down. Last, how much will you need for closing costs? Typical closing costs include earnest money, inspection and appraisal fees.
Other costs to consider when purchasing a home include:
Homeowner's Insurance
Once you find an insurer, you will need to pay the premium Most lenders charge an underwriting fee to process your loan application.
Origination Fee or Commitment
This is a fee lenders charge for extending a loan above and beyond the interest they charge. If you are considered a credit risk, you may be charged more. This typically costs between $250 and $350.
Inspection
Once you've made an offer on a home, you will need to have a property inspection.
Mortgage Insurance Premium (MIP)
This is the insurance required for an FHA loan. It is typically 2% of the loan, plus 1/2% annually for a certain number of years. Keep in mind, you will never need both PMI and MIP.
Mortgage Registration Tax
This tax is from the state, county, and city. All Minnesota mortgage borrowers must pay $1.15 per $500 of the mortgage.
Settlement or Closing Fee
This fee is paid to the person conducting the closing, and is typically around $300
Credit Report
Lenders will order a credit report for all persons applying for the mortgage loan. This report is around $60.
Recording Fees
These fees are passed on to the county where the property is located to cover document recording costs. This fee is around $25 to $40.
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