The Ultimate Guide to Fees When Buying a House
When buying a house it can be overwhelming to understand all of the upfront fees associated with closing. From the initial steps of pulling your credit report, to applying for a loan, all the way to furnishing your house there are a lot of expenses involved. To make your life easier we’ve compiled a complete list of fees when buying a house. This will help you better prepare your budget, qualify for a mortgage loan, and ensure that you are prepared on your journey to purchasing a house.
A Breakdown of Closing Cost Fees When Buying a House
Full Credit Report ($30)
When you apply for a mortgage your mortgage lender will pay a fee to pull your full credit report from the three main credit bureaus to obtain your credit score and history. This expense will be added to your closing costs.
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Appraisal of the Property ($300-$400)
Getting an appraisal of the property you are applying for a mortgage for is typically required by most mortgage lenders. It’s also a good idea for your own understanding of the property as its value fluctuates over time based on demographic, the surrounding neighborhood, and comparable homes in the area. An appraisal will also give you pertinent information about selling your house in the future and sales trends of other houses in your neighborhood.
Survey of the Land ($300 – $500)
Before you put an offer on a house, you’ll need to know where your property line is by conducting a land survey. This is also a step required by most mortgage lenders. This not only gives you a representation of your property, but also brings you up to date on zoning restrictions that pertain to your property.
Flood Zone Determination Fee ($20-$30)
Prior to purchasing a house you will want to know if your house is located in a flood zone. If it is determined that you are located in a flood zone, it will affect your overall homeowners insurance costs as you’ll need to purchase flood insurance as well.
Basic Home Inspection Fees ($200-$400)
At times a home seller will hire a home inspector to prepare to sell their house. Even if this is the case, you will want to hire your own home inspector to inspect the property before you put down an offer. A home inspector will be able to identify any major foundational, electric or plumbing issues that could deter you from buying the house.
Added Home Inspection Evaluation fees ($100 – $1,000)
If you suspect asbestos, radon, mold, lead paint or termite damage you should order additional, more detailed inspections. These will cost an additional fee when buying a house because they are added areas that aren’t typically covered in a home inspection. Depending on what extra evaluations you have done you could need to budget for over $1,000, so take the age and condition of the house into consideration before adding on these fees.
Earnest Money Deposit (1 – 5%)
In order to show you’re serious about making an offer on a home, it’s common to write an earnest money deposit check. This check is typically between 1 – 5% of the homes price and makes your offer stand out among other buyers. Whatever you put down in your earnest money deposit will be taken into account as a part of your down payment.
Down Payment (3.5 – 20%)
The minimum down payment on an FHA mortgage loan is 3.5%. However, in order to lower the cost of your monthly mortgage payments it’s smart to have between 10% to 20% saved to put as a down payment on the home.
Mortgage Loan Fees
Loan Origination fee (0.5% – 1%)
An origination fee on your mortgage loan is charged by the lender in order to process your loan.
Commitment Fee (Up to $1,000)
A commitment fee on your loan varies based on the lender you choose for your mortgage. It’s usually either a percentage of the loan that is agreed upon, or a flat rate, like $1,000, for example. This fee is in place to compensate the lender for committing to lend to the borrower.
Document Preparation Fee (Varies by lender)
The broker, originator or lender will typically have a fee involved for preparing all of the necessary documents that are required to buy a house.
Recording Fees (Varies by lender)
Once your mortgage is prepared, the lender will send it to the proper government agencies in order to record it with the state. This costs a fee which you cover in your closing costs.
Processing Fee (Up to $1,000)
After your loan has gone through the multiple steps it takes to be valid, your lender will charge a processing fee. This fee is to compensate for the work it took to process your mortgage loan. Depending on how complicated your mortgage loan is, this fee can be up to $1000.
Underwriting Fee ($500 – $800)
Before you are approved for a loan, your lender does research into your credit history, and other elements that determine your loan eligibility. They can charge anywhere from $500 – $800 for the work it takes to do this research.
Tax Service Fee (Varies by State & Lender)
This fee is charged by the state when the title is passed from the seller to the buyer. These fees also apply when there is a late or missed housing tax payment by the new buyer.
Discount Fees or Points (0-1%)
These are fees paid upfront on the mortgage that help lower your monthly interest on the loan. The more money you put toward these mortgage discount points, the lower your monthly interest rate. The money put down for this purpose is also tax deductible.
Attorney Fees (Varies by Attorney)
Depending on the negotiation of your contract with the seller, one or both parties may have attorney fees as a part of their closing costs. If an attorney is involved in the process of the home negotiation, this will cost a fee.
Closing or Escrow Fee ($2 per $1,000)
During the process of closing on a house, the money from your lender and other elements of your offer (your down payment, for example) are placed into an escrow account. This is to hold the money while the details of your mortgage and negotiation with the seller are being processed.
Lender’s Title Insurance ($2.50 per $1,000)
In order to protect the lender's interest in the property they are lending you a mortgage loan for, you will need to provide lenders insurance. This is to ensure that your lender is not affected in the case that there is an issue with the title or ownership of the home.
Owner's Title Insurance ($3.50 per $1,000)
On the other hand, in order to protect you as a homebuyer, you will also need owner’s title insurance. This will protect you if a problem with the title of the property arises. This fee is typically bundled into your closing costs as a one time fee. It can also be bundled with lender’s title insurance.
Courier Fee ($30)
There is a fee charged to deliver documents to the seller, courthouse, seller’s or buyer’s lender and other pertinent people involved in the home closing process in a timely manner. This is typically charged to deliver documents as soon as possible so that no additional interest is accrued on your mortgage loan.
Homeowners Insurance ($300 and up)
Another fee when buying a house is homeowners insurance, which you will be required to purchase to cover damages that may occur. During closing you will typically pay your first year’s insurance.
Neighborhood Fees
Property Taxes ($30 to $60 per $1,000)
Depending on the location of your new home the property taxes you are required to pay will vary. The taxes in your county are determined by the government and are used to fund the local emergency services, parks, libraries, public transportation and school systems. In mid-Michigan the millage rate ranges from 30 to 60. This means that on every $1,000 of tax-assessed value of your property you will pay anywhere from $30 to $60 in taxes.
Homeowner Association Transfer Fees and Monthly Fees ($200 – $400+)
Based on your neighborhood you may be required to pay home association fees. At the point of sale, the seller will pay for a homeowner association fee transfer to show that the dues are up-to-date and that the buyer is now responsible for the dues moving forward. Typically home association fees range depending on neighborhood amenities and other factors determined by the association. They can be anywhere from $200 to $400+ a month.
Grand Total Closing Cost Fees When Buying a House
Depending on the price of your house you could pay anywhere from $3,000 to $10,000+ in closing costs. The average amount buyers report paying in closing costs are around $3,700. Keep in mind that this number does not include your down payment.
Other Fees to Budget for when Buying
Now that you know what to expect during the closing process, the fun part begins. You have the keys to your new house and you’re ready to move in. There are some expenses that you need to plan for during the transition period of moving into your new house and taking on monthly payments. Here are some additional fees when buying a house to budget for.
Moving Fees ($800 – $5,000)
If you decide to hire a moving service to move your belongings into your new house there are fees associated with the move. If you are moving in-state you can expect to pay anywhere from $800 to $2,000. However if you are moving between states the prices to move your belongings will be closer to the $3,000 to $5,000 range.
Cleaning Fees ($25 to $35 an Hour)
Depending on the state of your newly purchased home, you may want to hire a professional cleaning service. Materials like carpeting and bathroom tile, that you do not plan to immediately replace should be cleaned so that you can start fresh in your new house. Typical cleaning fees cost anywhere from $25 to $35 an hour.
Crucial Home Repairs
Upon purchasing your house, you may have negotiated crucial fixes into your final agreement with the seller, or left some wiggle room in your budget to do them out of pocket. Whichever the case, there may be repairs that you wish to make before moving into your new home or furnishing a room of your new home that should be budgeted for.
Cosmetic Home Repairs
Minor repairs like painting walls, updating cabinets and other cosmetic updates should also be considered in your budget. These updates can add a ton of value to your home over time. However, they can typically be spaced out over time and don’t need to happen right away.
Furniture
Another fee when buying a house, especially if you’re upsizing, is the cost of furnishing a home. Although this can also be done over time, crucial furniture pieces like couches and beds will need to be included in your overall budget.
Monthly Mortgage Payment
Now that you have the keys to your house you will begin to pay a monthly mortgage payment on your house. An initial fee when buying a house is the first two months mortgage as part of your closing costs, but you will need to budget in your next mortgage payment as it will approach quickly after you’ve moved in.
Electric Bill ($75 – $200)
The average electric bill in the U.S. ranges from $75 to $200 a month depending on the size of your home and your typical usage. This monthly fee should be considered when purchasing your home.
Gas Bill ($15 – $150)
Depending on how your appliances are fueled, you may have an electric and gas bill. Gas also typically covers the cost of heating your home. Because this the monthly prices can fluctuate dramatically during cold months, the average gas bill ranges from $15 – $150 a month.
Water Bill ($80 – $200)
City water and sewage charges will vary depending on where your house is located. Most cities charge a water and sewage fee every 2 to 3 months. This bill ranges from $80 – $200 depending on your water usage.
Cable and Internet Bill ($80 to $150)
Another fee when buying a house is your month cable and internet bill. If you opt to have cable and internet in your home, this monthly fee ranges from $80 to $150 a month depending on the provider and level of service you choose.
This complete list of fees when buying a house will help you prepare for the cost of homeownership. There are certain areas where there are room to save money, like cosmetic updates and opting out of cable for example. This list will give you a better idea about what you can afford. The best way to be on top of all of the fees associated with buying a home is to consult with a realtor. They will be your best resource in terms of planning your budget and negotiating a purchase price.
