Unexpected Costs In Purchasing A House

By
Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

When First Time Buyers are preparing to purchase a home they usually only focused on the downpayment, and are surprised to find out there are other funds required to purchase a property.  These Unexpected Costs In Purchasing A House can some times cause especially First Time Buyers to become discouraged and postpone their home buying search.  Therefore, it is important to discuss all funds required to purchase a property as early in the process as possible.

The most common costs First Time Homebuyers do not think about are Closing Costs.  Closing Costs not only come as a surprise to First Time Homebuyers, but the total amount of the Closing Costs can be a major shock. Yes, there are ways to cover Closing Costs without the Borrower(s) using their own funds, such as Downpayment & Closing Cost Assistant Programs (DAP), but the shock of hearing about these costs for the first time can really be sobering.

I am always prepared for this initial shock, and I know I have to take the time to fully explain these unexpected costs.  When Closing Costs are explained correctly, and Borrowers understand them, the initial shock normally goes away.  

The bulk of Closing Costs are not Lender Fees.  The bulk of the Closing Costs are third party fees which are mostly fixed fees, and generic to all mortgage loans.  The exceptions would be funds required for escrows, points, and prepaid interest which fluctuate based on the price of the property. As a result the percentage of Closing Costs are higher on lower price properties than on higher price properties. 

Below is a list of the Closing Costs most common to all mortgages.

  • Application Fee/Processing Fee
  • Appraisal Fee
  • Attorney Fee
  • Title Insurance Fee
  • Recording Fees
  • Daily Interest Charge
  • Homeowners Insurance
  • Escrows:
    • Taxes
    • Homeowners

There could be other Closing Costs which are less common such as:

  • Points
  • Credit Report
  • Flood Certification
  • Funding Fees
  • Condo Questionnaire Fee
  • Re-inspection Fee

These costs can easily add up to several thousand dollars regardless of the loan size, because as I stated before most of these Closing Costs are fixed cost.  When First Time Buyers hear about these Unexpected Costs In Purchasing A House for the first time it is understandable why it can be really daunting for them.  But as shocking as hearing about Closing Costs can be, finding out about costs they will incur before the Closing can be equally if not an even bigger shock.  I will cover these costs in my next blog "Unexpected Up Front Costs In Purchasing A House".

 

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Old Saybrook, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or souto@snet.net

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Re-Blogged 10 times:

Re-Blogged By Re-Blogged At
  1. Nina Hollander 01/19/2014 09:27 PM
  2. Barbara Altieri 01/20/2014 09:00 AM
  3. Praful Thakkar 01/20/2014 11:57 AM
  4. Jill M. Zais 01/20/2014 09:07 PM
  5. Chuck Carstensen 01/20/2014 10:17 PM
  6. Sean Williams 01/20/2014 10:49 PM
  7. Barbara Woods 01/21/2014 12:20 AM
  8. Stephanie Arnett 01/22/2014 06:22 AM
  9. Debbie Reynolds 01/30/2014 11:35 AM
  10. Winston Heverly 04/17/2014 09:53 PM
Topic:
Mortgage / Finance
Location:
Connecticut
Groups:
Realtors®
Mortgages
1st Time Buyers
Real Estate Rookie
Be The Best In Your Field
Tags:
unexpected costs

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Show All Comments
Rainmaker
1,317,376
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

I try to go over costs as soon as possible.  One of the big costs in New Hampshire is the transfer tax.  $15.00 per 1000 of the purchase price!  It is paid 1/2 by the buyer and 1/2 by the seller .. and it can be a big $$ cost.

Jan 20, 2014 11:20 AM #37
Rainmaker
237,534
Christi Farrington
William Raveis Real Estate - Norwalk, CT - Norwalk, CT
~ Your representative in Fairfield County, CT

As usual, George, great information!!  I bookmarked it! Thank you for your post and excellent, informative explanation.  Have a great day and look forward to your next post!! :)

Jan 20, 2014 11:52 AM #38
Rainer
54,906
Tamara Liggins
Keller Williams Realty, Saint Louis Call Me today at 314.677.6104 - Florissant, MO
Bringing Buyers & Sellers to Homes!

Wonderful article and very informative. Often times most information simply talk about Downpayment Assistance but really don't spell out the bottom line that could be incurred. I myself was blind to it until a few years ago. Even when I hear other buyers discussing their purchase with others, they even still neglect to talk about that bottom line of what needs to be brought to the table. Great information!!

Jan 20, 2014 11:52 AM #39
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Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

George, bookmarked and will re-blog this post.

Must read for all buyers who think 'no closing cost' means ZERO!

Jan 20, 2014 11:55 AM #40
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Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

George, bookmarked and will re-blog this post.

Must read for all buyers who think 'no closing cost' means ZERO!

Jan 20, 2014 11:55 AM #41
Rainmaker
1,474,074
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

I remember a young man from years ago who wanted to buy a home with a VA loan. He had NO money, but he KNEW that as a veteran he could buy with nothing down. I tried to explain that yes, there would be no down payment, but that (at that time) he'd need about $2,500 for the closing costs.

He got really angry, telling me that I was lying to him - he knew better than that.

A week or so later he came back in, screaming about how he'd been misled. He'd found out that (at that time) veterans had to pay their closing costs.

I don't know if he ever did buy a house, but if so, he didn't buy it through me.

Jan 20, 2014 12:08 PM #42
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Excellent, George. There are so many costs up front that most buyers are not aware of nor do they think to ask.

And then there are the start-up and maintenance costs of a new home, and all the new furniture and supplies thay they might be interested in buying. New homeowners are simply not aware of what these all could be when planning their budget. It's a conversation I always have.

Jeff

Jan 20, 2014 12:13 PM #43
Rainer
56,222
LeAnn Sink - Realtor Knoxville, TN
United Real Estate Solutions - Knoxville, TN
#ThinkSink when you need an agent.

Well said! This is something that I always talk about first while we are searching for homes and I talk about it several times throughout the process so it becomes engrained before we go into contract. Believe it or not, but I've had several fellow agents tell me not to discuss this so early because it might "scare them away".....I have never followed that advice. Ever.

Jan 20, 2014 08:22 PM #44
Rainmaker
476,185
Terry McCarley
REMAX Realty Team - Cape Coral FL - Cape Coral, FL
REALTOR, SRES, CDPE - Cape Coral, FL

Excellent post!  I work with lots of first time home buyers and it is critical they understand all expenses involved in purchasing a home.  Having them meet with an excellent lender is the best way to start the process.

Jan 20, 2014 08:23 PM #45
Rainmaker
612,091
Mike McCann - Nebraska Farm Land Broker
Mike McCann - Broker, Mach1 Realty Farmland Broker-Auctioneer Serving Rural Nebraska - Kearney, NE
Farm Land For Sale 308-627-3700 or 800-241-3940

I tell all Buyers to budget between 1-3% of purchase price for unexpected closing costs depending on price range of the home. I then just say if it isn't used on the closing, I am sure you find a good use for it after closing.

Jan 20, 2014 09:34 PM #46
Rainmaker
830,968
David Popoff
DMK Real Estate - Darien, CT
Realtor®,SRS, Green ~ Fairfield County, Ct

A great list to share with buyers, best to be prepared, that is why we must have our buyers talk to mortgage brokers first.

Jan 20, 2014 09:40 PM #47
Rainmaker
120,440
Sean Williams
AcklesWilliams of Semonin Realtors - Louisville, KY
Your Louisville Realtor

George, great post with lots of helpful information. I was just speaking with a 1st time buyer this morning and she was asking about the downpayment...it was a little surprising to her when I told her about the other costs such as the closing fees etc. It is vital that buyers know all the costs involved before getting into a transaction. 

Jan 20, 2014 10:34 PM #48
Rainmaker
220,052
Dora Griffin
D A Griffin Financial.LLC - Fort Thomas, KY
NMLS 6380

George, excellent post! It is our job to educate buyers about these things and you've got it down pat. I spoke with a young couple with a new baby recently. They had $500. Even if you CAN buy a home with zero down and if the seller pays some costs, stuff happens after closing. It is wise to have some money for an emergency. 

Jan 20, 2014 11:11 PM #49
Rainmaker
368,638
Travis "the SOLD man" Parker; Associate Broker
Team Linda Simmons, Enterprise, AL 36330 - Enterprise, AL
email: Travis@theSOLDman.me / cell: 334-494-7846

As many other that have posted here say, I too always tell my Buyers to set aside from $1,000 up for moving surprises.

Jan 21, 2014 12:30 AM #50
Rainmaker
952,153
Aaron Hofmann
Atlanta Communities - Smyrna, GA
aka Mr. Smyrna Vinings

I always have an initial consultation with buyers and walk through all the expenses that they can expect to incur and when and if they haven't talked to a lender, then that is their next immediate step without passing Go.

Jan 21, 2014 03:04 AM #51
Rainmaker
1,431,110
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Closing cost really do add up and people need to keep them in mind.  They really vary, but roughly I think 3% of purchase price is a good number to keep in mind.

Jan 21, 2014 03:25 AM #52
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Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams fox cities - Stevens Point, WI
Forestland Experts! 715-204-9671

Always lots of hidden costs, and when all of these are covered they get to experience a few more like moving costs and utility transfers.

Jan 21, 2014 04:10 AM #53
Rainer
301,119
Jimmy Faulkner
Florida. Homes Realty & Mortgage - Wantagh, NY
The Best Of St. Augustine

You really have to qualify a buyer on all the costs associated with buying a home. Many of theese costs the buyer is very unaware of.

Jan 21, 2014 09:37 AM #54
Rainmaker
372,482
Stephanie Arnett
RE/MAX Partners~ Starkville, MS - Starkville, MS
SRS, IMSD, Broker Associate, REALTOR

GREAT post!!  Off to reblog :

Jan 22, 2014 06:20 AM #55
Rainmaker
273,464
Wayne B. Pruner
Oregon First - Tigard, OR
Tigard Oregon Homes for Sale, Realtor, GRI

This is good information for any new Buyer. A good Realtor, such as George, can advise you before you start.

Feb 01, 2014 06:03 AM #56
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