Our last ultimate guide to buying homes post, talked about what you should tell your real estate agent, now it’s our turn to talk to you about home buying costs you need to know about. You can also read more articles here:
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Mortgage Closing Costs
Lenders and banks have different home buying costs relating to a mortgage, so be sure to find out what each charges. There may be application fees, credit check fees, fees related to closing your purchase. Every lender should give you a GFE – Good Faith Estimate – which includes not only the cost of your loan but the fees to close the loan. Be careful of a company that will drop those fees to the ground, I am a firm believer in you get what you pay for.
Be ready for title insurance costs for your lender and mortgage insurance premiums too. Ask your lender when each item has to be paid.
Tip: Internet lenders fees often come in considerably higher than local lenders. Check it out!
If you are getting a mortgage to buy your home, the lender will want an appraisal to be sure you are not overpaying, well really to make sure they are not over lending. This is your cost and typically will run about $400 to $750 for some of our larger homes. This is usually paid at the time of your mortgage application.
Tip: If you are not getting a mortgage, it may be something you would like to have done, again the cost is yours. This was far more common during the real estate market troubles but now we are stabilizing and prices are holding, not often done.
Homes Inspection, Radon Testing, Lead Paint Testing, Mold Testing.
Home buyers are counseled always to have a home inspection. You don’t know what you don’t know! A property may look perfect but it’s the hidden things you cannot see or know of, that can become the biggest headaches.
General home inspections are the most common and will provide you with a full report and a summary of items that need addressing. Radon testing is more common and something I highly recommend. Radon is a known carcinogenic. Expect to pay $300 to $800 for the inspection and $200 to $400 for Radon. The higher prices are for the homes with size-able square footage. To give you an idea, a 10,000 square foot home with full basement is a full day for the inspection. Radon tests need 48 hours.
Lead paint testing is not needed in homes built after 1978. Homes built prior to that date may have lead paint, another carcinogenic. (Lead based paint chips off, falls to the ground, and well, we all know what young kids do right?) It’s entirely your choice and I don’t have costs because it’s been a long time since a buyer had one done. Mold is another problem a property may have. It lurks in those hidden warm areas. The last test one of my buyers had in 2014 started at $1,000 and the cost goes up according to how much and what type of testing you choose.
Other testing. If buying a lot of land you’ll likely want to be sure you can build your dream home. Soil tests and engineering may be required, these are again your cost and will likely run you $500 as a minimum and up, depending on what you want done.
For those that maybe moving into Illinois, here in the metro area of Chicago, real estate sales are done under the watchful eyes of attorneys. That’s not to say you absolutely have to have one, but you better know what you are doing. As your Realtor we cannot get involved. You can represent yourself or hire an attorney but do not look at us, we are not licensed attorneys. In lower Illinois we know attorneys are not as often used. In my mind this is one of those must have home buying costs that is not worth doing without. Both buyer and seller will have separate attorneys. The fees are going to be around $400 to $500 for a simple, easy to do transaction. Some charge more depending on the price of home or complexity of transaction. Others charge for a set amount of hours, then an hourly rate for extra time spent.
HOA Fees – Condos
You may be required by the association to pay into the HOA reserve fund, there may be an application fee to become a resident.
Real Estate Taxes and Home Insurance
One of the biggest “check book” surprises are these two items! Be prepared to pay for a years home insurance just before you close, if you are getting a mortgage. It’s very commonly a condition of your mortgage funding. You may also be required to start depositing funds towards the next years premium into the lenders escrow account.
As a buyer you start paying real estate taxes from the day you own the property. Your lender may also require you to start funding for future bills.
Your Realtor’s Fees
In the majority of cases our fee is paid by the home seller via their appointed listing brokerage. We accept what they are offering via our MLS. If there is any change to that we must inform you right at the very start and get your agreement and consent to pay.
Home Buying Costs – Add It All Up
My best advice is to find out the cost of each, tally up your home buying costs to make sure you know what’s expected out of your pocket. Every service provider will give you an estimate.
Tip: There are more costs involved in a real estate sale and purchase. Sellers have responsibility for commission, title insurance for you, transfer taxes.
Now we know what you want in a new home, and you know what the costs are, we’ll finally be moving on to the fun part, the search! See you in the next article.