Home Buying Costs That You Probably Don't Know About
When most people talk about the cost of buying a home, they mostly focus on the listing prices of properties, which the down payment and mortgage will take care of. However, there are many other costs associated with buying a house. Here some that you may not be aware of:
Private Mortgage Insurance
Private mortgage insurance, PMI for short, protects your lender from financial loss in case you default on your mortgage payments. Most lenders will require you to purchase PMI if they think you have a high risk of defaulting and the lender is loaning you considerable money. In most cases, this means you can't come up with the conventional 20% down payment. You will have to carry PMI coverage until the lender is certified that you are not a high-risk borrower; this usually means you have to make the payments until your home equity rises to a reasonable level. It can range from 0.5% to 2% of your loan (charged on the reducing loan balance).
Lender's Origination Fees
Your lender will charge you this fee for processing your loan. It is also charged as a percentage of the loan advanced to you, and it is negotiable. The amount of origination fee you are charged depends on your creditworthiness as well as the amount of loan you are borrowing. Most lenders will lower your origination fee if you have qualified for and are borrowing a large amount because they can still get reasonable money from you (remember it's a percentage) and they don't want to lose your business.
When you buy a home, expect to be servicing multiple regular payments to different parties. For example, there will be insurance premiums, mortgage payments, and property taxes, among others. What you may not know is that you will have to pay some of these costs upfront when buying a house. For example, you may be required to pay a portion of your property taxes and insurance premiums upfront and put them into an escrow account.
Lastly, you may also have to cough up some money to cover the survey costs. The survey is necessary to determine the exact or legal boundaries of your property. The survey determination is not just for your benefit; your lender also has a vested interest in it because they want to confirm that the property is the right size and is not overvalued.
Therefore, if you are planning to buy a house, consider all the possible costs in your budget to help you buy a house you can afford. Otherwise, you might get stuck along the way and lose some of your resources. Contact a company like Charles Vivash PREC for more information and assistance.