When you’re purchasing a new home, you’re likely focused on costs, such as the price of the home and the interest rate you’ll get on the loan. These are, of course, important factors to take into account, but there are many more costs you’ll need to consider while you prepare to purchase a home. Some of these fees can be paid up front, while others will get included in your loan. It’s important to consider all of these potential costs so you can get a better sense of the true cost of your home purchase.
Here are some examples of those fees:
- Private mortgage insurance: If you put less than 20 percent down on your home purchase, you will likely be required to purchase private mortgage insurance (PMI). PMI is provided by a separate private mortgage insurance company to protect a lender against losses in the event you default on the loan. There are two different types of payment you may need to make: monthly PMI premiums and an up-front PMI payment. The up-front premium can either be paid at closing or rolled into the loan.
- Homeowner’s insurance: You should never attempt to skip out on a homeowner’s insurance policy. This policy will combine your personal liability and hazard insurance to cover your home and everything inside of it. In most cases, you must purchase this policy before you close on the home. You’ll need to pay the first year’s premium in advance, which demonstrates to your lender you have insurance in place before closing.
- Title insurance: This type of insurance protects the lender if any issues pop up with the title of your home. You’ll be required to purchase this policy for the lender, and its costs will be included in your closing costs or put into the loan. Personal title insurance is optional.
- Appraisals: You’ll need an appraisal to determine a fair market value for your home. The lender wants to know the home is actually worth the amount of money you’re looking to borrow. This fee will be paid to a lender up front before the appraisal actually happens.
- Escrow: An escrow account holds your money during the closing process while you finalize an agreement with the seller. You’ll have some of your mortgage payments go into escrow to pay for property taxes and homeowner’s insurance. There are typically some fees associated with this.
- Origination fees: These are fees paid to the lender for the services involved with creating the loan.
- Document preparation fees: Your broker or closing attorney will typically charge you fees to cover the preparation of all the documents required for the closing and the loan. These fees will usually be included in closing costs.
There are more fees that will likely apply to your home purchase, so for a full overview of all the fees you can expect to pay, contact Carpenter Real Estate to speak with a Realtor in Alpine, TX. We’ll be happy to provide you with additional information.