Mortgage rates low? Great! Your qualification is rock solid? Fantastic! You've saved money for the down payment and your credit score is stellar? Terrific! But before you buy, don't forget about the other costs associated with homeownership.
There are plenty of fees to consider when purchasing property, from closing costs and points to commissions and transfer taxes. Some of those charges, like property taxes and private mortgage insurance, will be due on an ongoing basis. Others, like prepaid interest or homeowners insurance, are one-time fees that you need to consider as part of the initial house-buying equation.
Here are some fees I wish I had known about before I bought my first house...
Closing costs: In some cases, the closing fees charged on a house purchase will exceed your down payment , which can put a dent in your budget as well as delay your move into a new home. And while you cannot avoid paying all of these costs, you can minimize your out-of-pocket expenses by having a good idea of what they are.
Application fee: This covers the cost of running your credit report and determining whether you qualify for the mortgage. It's typically $100 or less, but can be as high as $500. The good news is you only have to pay it once per creditor when you apply for multiple mortgages.
Mortgage discount points: These are fees that allow you to buy down your interest rates on a new home purchase . Each point equals 1 percent and they can reduce your interest rate by as much as 0.5 percent, although the typical range is from 0.1 percent to 0.25 percent.
Transfer tax: This is a state charge that varies based on the value of your home. In some states, it's minimal while in others, such as New York City and Washington, D.C., the cost can be quite substantial.
Recording fees: The county or locality where you live may charge a fee for recording deeds, mortgages and other legal documents. This is another cost that varies by region and the amount can be as low as $25 to as high as $150.
Homeowners insurance: This is an annual fee charged on most loans to cover the replacement costs of your home (or entire neighborhood in some cases). The fee is usually added to your monthly mortgage payment.
Flood insurance: If you live by a body of water, you may be required to purchase flood insurance as well. This is paid annually and typically tacks on 0.5 percent to 1 percent to the total cost of your homeowners insurance.
Title insurance: This is also an annual charge and covers the lender against any financial loss due to title defects. Your real estate agent can usually bundle this with their services (and pay for it with commission deductions), or it can be paid by you, the buyer. The cost of title insurance varies by state and ranges from $300 to $900 per year.
Its important to know and understand the hidden costs of homeownership before you buy a home. There are plenty of fees involved when purchasing a property, from closing costs and discount points to commissions and transfer taxes. Don't forget to consider these things before you're ready to buy your first home!