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The 5 Most Common Fees Associated With Purchasing a Home

Aside from the list price, there are five other fees commonly associated with buying a home that you need to be aware of.

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When buying a home, here are the five most common fees, outside of the purchase price of the home itself, that you can expect to pay:

1. Down payment. Typically, down payment expenses make up anywhere from 3% to 5% of the overall purchase price. Some buyers choose to make a down payment of 20% or more, and there are benefits to putting that much down, but there are also several down payment assistance programs that allow you to buy a home with 0% down if you meet the loan requirements. The best way to find out how much money you’ll need to cover your down payment is by talking to your lender.

2. Closing costs. This is usually the second-largest out-of-pocket expense homebuyers make, and it’s often confused with the down payment. Most of the fees involved with your closing costs are associated with the preparation of your mortgage. These include attorney fees, title insurance fees, taxes, lender costs, and homeowners insurance.

Some of these costs, such as the recording and transfer taxes charged by your state and local government, are non-negotiable. Others, though, you may be able to negotiate over with the seller. The amount you’ll pay overall depends on the size of your loan and what taxes you pay in your area, but they generally constitute 3% to 6% of the purchase price.

The best way to find out how much money you’ll need to cover your down payment is by talking to your lender.

3. Earnest money. This isn’t necessarily a fee, but it is something you need to be aware of because you’ll need earnest money up front to move forward with the purchase of the home. Earnest money is basically your proof to the seller that you’re serious about buying their home. There needs to be earnest money involved to protect the seller’s interests while they take their house off the market and give you time to do your inspections. In the Houston area, the earnest money amount is usually 1% of the purchase price. This amount is then credited back to you at closing.

4. Appraisal fee. An appraisal is an educated guess as to how much the property is worth. No credible financial institution will lend you money to purchase a home without first getting an appraisal done on that home. Appraisals usually cost $500.

5. Home inspection fee. This is technically an optional fee, but we always recommend getting a home inspection when buying a home. An inspection will determine whether there are any problems with the home that need to be addressed before moving forward with the purchase. An inspector will look at the mechanical functions of the house to make sure everything is in working order. There are also specialized inspectors who perform a specific type of inspection, such as a termite inspection.

If you have any more questions about home purchasing fees or you have any other real estate needs I can take care of, don’t hesitate to reach out to me. I’d be glad to help you.

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Our agents write often to give you the latest insights on owning a home or property in the Greater Houston area.

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