9 Common Fees when Buying a Home
When you are looking at homes online, the sales price of the home listed for sale is not the only cost associated with buying the home. I know, I know, there's always a catch. It will all be worth it though when you've unpacked that last box and you're officially in your new home. You won't even be thinking about any of this, but we've gotta read the fine print. so here we go.
1. Home Inspection. The home inspection is technically an optional fee, but I would never recommend skipping this. In North Carolina, our real estate contracts offer an inspection period for the homebuyer to have the property inspected by a professional. The home inspector will determine whether there are any problems that need to be addressed before moving forward. In North Carolina, this fee is usually around $300-$700, depending on the size of the home.
2. Pest Inspection. You will want to know if a home has termites or other potential pest issues, or signs of previous infestations, because they can cost you money. Just like the home inspection, this inspection will tell you if you’re buying into an existing problem. This fee is usually around $75. Most home inspectors can schedule this for you and it will be included in your home inspection cost.
3. Appraisal. In order to ensure that the mortgage company is lending money on a property that is actually worth the price that you have agreed to in the contract, they will order a property appraisal. A professional appraiser will analyze the property to determine its fair market value. This appraisal fee is passed on to the buyer, since it is a requirement of the loan and usually costs $400-500. It's typically part of your closing costs, but you usually have to pay it upfront before closing.
4. Earnest Money. Earnest money is not necessarily a fee, but it is something to be aware of because you will need the funds ready when you put in a contract on a house. Earnest money is basically a buyer’s proof that they “earnestly” want to purchase the home. In North Carolina, earnest money is usually around 1-2% of the purchase price of a home. Read more about earnest money here
5. Due Diligence Fee. North Carolina homebuyers have a period of time during which they can fully investigate a property (and the financing process associated with the transaction) and decide whether or not to proceed with the home purchase. You are compensating the Seller for taking the property off the market for the duration of your due diligence period and your right to cancel the contract during this time period. In our market, buyers typically offer $500-$1000. It could be more or less, it usually depends on the desirability of the property. Assuming that all goes well, the due diligence fee will go towards the down payment and closing costs. Read more about due diligence fees here
6. Closing Costs. These are miscellaneous fees needed to complete the closing of your home purchase. They include underwriting fees, discount points, processing fees, recording fees, title insurance fees, etc. Buyers typically pay 2-5% of their purchase price in closing costs. Many of these expenses should be outlined in the Good Faith Estimate provided by your lender. They may change slightly before closing depending on the day you close, but are not allowed to increase more than 10%.
7. Property Taxes. You’re probably already aware that you are required to pay property taxes, but you may not realize you may need to pay them at closing. How much depends on the date you are closing; so, if your closing is delayed, this could change. (This is part of your closing costs.)
8. Home Insurance. This expense is required by your mortgage company because it protects their asset (your home). Homeowners insurance will vary based on the policy that you choose. Shop around though! It is not always cheapest to bundle it with your auto insurance! This expense is commonly escrowed into your monthly mortgage payment.
9. Homeowner or Condo Association Fees. This expense is only relevant to properties in neighborhoods with a homeowners association. The fee is paid by the residents of the neighborhood to pay for all neighborhood maintenance and operating fees. This expense will vary greatly, based on the amenities of the subdivision or community that you purchase in. Townhomes and condos can have much higher fees, because they typically take care of all the exterior maintenance and lawn care.
Maybe you feel completely overwhelmed now and think 'There's no way on God's green earth I'm buying a house now'. I promise you it's not that bad. Get an estimate of closing costs from your lender. The due diligence fee and earnest money go towards those closing costs and your down payment then you've got your home inspection and appraisal. We can sit down and go through it together so you know what you're getting into. If you are in the Triangle area of North Carolina, I'd love to be your Realtor. If not, ask me for a recommendation of who you should work with.