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 funds needed for the down payment, and are surprised to find out there are other funds required to purchase a property.  These other 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 to avoid surprises later on.

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 Seller Paid Closing Costs, and Down Payment & 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, and 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, title policy, 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 Feed
  • Flood Insurance Fee
  • Recording Fees
  • Daily Interest Charge
  • Homeowners Insurance
  • Credit Report
  • Flood Certification
  • Escrows:
    • Taxes
    • Homeowners

There could be other Closing Costs which are not part of every loan, and are more loan program specific such as:

  • Points
  • 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 a bigger shock.  I will cover these costs in a future blog "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 3 times:

Re-Blogged By Re-Blogged At
  1. Patricia Kennedy 07/15/2016 04:57 PM
  2. Gita Bantwal 07/15/2016 08:57 PM
  3. Gabe Sanders 07/23/2016 04:15 PM
Topic:
Mortgage / Finance
Location:
Connecticut
Groups:
Realtors®
Mortgages
1st Time Buyers
Real Estate Rookie
Be The Best In Your Field
Tags:
closing surprises

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Harry F. D'Elia
Real Estate and Beyond, LLC - Phoenix, AZ
Investor , Mentor, GRI, Radio, CIPS, REOs, ABR

A buyer has to count the cost when purchasing a home.

Jul 15, 2016 10:46 PM #19
Rainmaker
778,974
Jennifer Mackay
Counts Real Estate Group, Inc. - Panama City, FL
Your Bay County Florida Realtor 850.774.6582

George Souto thanks for sharing your list - it is so important for buyers to know the so called "hidden" costs of buying a home up front!

Jul 15, 2016 10:48 PM #20
Rainmaker
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Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

Uh oh...I think I feel a bookmark coming on !  Yes...the best suprise for cost is none at all...and we believe that it lessens the Buyers ability to negotiate if you ask for them...so we do not include that in an offer.

Jul 15, 2016 10:58 PM #21
Rainmaker
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Thomas J. Nelson, Realtor, ePRO, CRS, RCS-D
Big Block Realty 858.232.8722 - La Jolla, CA
& Host of Postcards From Success Podcast

A good list to send to each of your new clients and repeat buyers. You have some fees we do not in CA, typically like attorney, but also escape some that we do have like in many areas Mello Roos Tax.

Jul 15, 2016 10:59 PM #22
Rainmaker
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Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

A lot of others come to the Real Estate watering hole to feed is what you find out

Jul 15, 2016 11:14 PM #23
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Emily Medvec Qualifying Broker
Hello Realty Partners - Santa Fe, NM
Realtor | Serving Santa Fe & Northern NM

Great post George! I have found that explaining the closing costs to Sellers gives them a better understanding of what buyers experience today. In many instances, they decide to offer a credit towards the purchaser's closing costs. Information for both sides about costs can make a difference and certainly eliminate surprises. 

Jul 15, 2016 11:51 PM #24
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Hi George

Well done and thorough prep for buyers on costs they can expect. I suspect most are surprised when they get into the process at how many different costs there are. Better to know and understand in advance to avoid surprises.

And then there are the costs associated with homeownership!

Jeff

Jul 16, 2016 12:35 AM #25
Rainmaker
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Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale-Probate & Trust Specialist

George, So true … and those costs can certainly add up.  If for any reason the sale does not close … the buyer eats those costs too. I recently had a buyer eat $1,800.  OUCH!  

Jul 16, 2016 12:46 AM #26
Rainmaker
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Sandy Padula and Norm Padula, JD, GRI
Realty National - Carlsbad, CA
Presence, Persistence & Perseverance

George Souto Another great post from you; Thank you! Since we do deal with so many non-resident buyers, often all the closing fees can seem foreign and shocking to many.

Jul 16, 2016 02:15 AM #27
Rainmaker
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Michael Jacobs
Coldwell Banker Residential Brokerage - Pasadena, CA
Los Angeles Pasadena Area Real Estate 818.516.4393

Hi George -- upfront preparation is so important.  Knowing sooner than later makes for a much smoother transaction and a happier ending.  

Jul 16, 2016 03:06 AM #28
Rainmaker
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James (Jim) Lawson, DBA
DomainRealty.com LLC - Bonita Springs, FL
Broker Associate, RSPS, BPOR, HI & PE

Well laid out George. I look forward to your sequel.

Costs can be looked at in many different ways when it comes to housing. My preference is to do so over time.

There are one-time costs like the appraisal fee, shorter-term costs like PMI, long- term costs like P & I payments in many cases and perpetual costs like maintenance, repair, taxes and insurance costs for example.

After getting a handle on these life-cycle housing costs, getting the net income picture over time enables the client to get a feel for the home they can afford to buy at that moment. With each client different numbers apply.

Clients seem to find their comfort zone more readily when this approach is used since the anticipated costs in purchasing a home are subsumed into what  I've outlined. Otherwise, these so called extra costs might very well keep them from purchasing a home.    

Jul 16, 2016 03:44 AM #29
Rainmaker
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Nick T Pappas
Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, @HomesBirmingham & Providence Property Mgmnt, LLC Hun... - Huntsville, AL
Madison & Huntsville Alabama Real Estate Resource

George, great post! Buyers are also not aware of some of the out of pocket expense before closing such as the various inspections: home inspection, termite and Radon inspections, structural and the appraisal.

Jul 16, 2016 07:45 AM #30
Rainmaker
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Nina Hollander
Coldwell Banker Residential Brokerage | Charlotte, NC - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Great list of additional costs, George. Many first time buyers don't have a clue and no one has reviewed them with them. 

Jul 16, 2016 09:33 PM #31
Rainer
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Sham Reddy
H E R Realty, Dayton, OH - Dayton, OH
CRS

Thanks for sharing!!! 

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 a bigger shock

Jul 17, 2016 03:38 AM #32
Rainmaker
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Evelyn Johnston
Friends & Neighbors Real Estate - Elkhart, IN
The People You Know, Like and Trust!

You are correct in saying most first time buyers don't know there are other costs besided downpayment.  We do the best we can to educate them at our initial sit down consultation.  Then when they find a house they know about the additional funds required and in most cases have saved even more money to cover them.

Jul 17, 2016 06:23 AM #33
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Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

This is very informative George and good information for anyone buying a house. Saving for a downpayment is important but there should always be extra money for an emergency fund and the incidentals of the move, too.

Jul 17, 2016 11:07 AM #34
Rainmaker
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Gary L. Waters Broker Associate, Bucci Realty
Bucci Realty, Inc. - Melbourne, FL
Fifteen Years Experience in Brevard County

Good to know. Also buyers need to understand all the numbers post closing like taxes, insurance, HOA fees, maintenance costs and the like.

Jul 18, 2016 04:45 AM #35
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Ed Silva
RE/MAX Professionals, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

So much of  this needs to be discussed with the buyer at the beginning of the process especially so they and their agent know what the buyer's finances are so that they can request closing cost assistance from the sellers on the contract

Jul 18, 2016 10:40 AM #36
Rainmaker
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Lauren Selinsky Broker CRS
California Coastal Estates - Aliso Viejo, CA
"Your California Real Estate Broker" TM #oclauren

Great list for buyers. Some states don't need attorneys, but overall very similar for us here in CA. 

Well done George Souto 

Lauren Selinsky 

Jul 23, 2016 04:35 PM #37
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Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams fox cities - Stevens Point, WI
Forestland Experts! 715-204-9671

Thanks George,

Important information for all buyers to keep in mind.

Jul 23, 2016 04:42 PM #38
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