July 16th, 2014
You’ve talked about a budget so you can save up to buy a house. But how much do you need to save?
There are loans with low to no down payments, and you will then need to factor in primary mortgage insurance (pmi) into your monthly payment.
But, it’s rare to find a no closing cost loan, and nearly impossible to find one that doesn’t have additional costs such as the home inspection fee. Plus, you’ll have to pay your homeowner’ insurance, and look into any additional maintenance, repairs or upgrades you would want to do. And if you’re purchasing in an area that has a homeowner’s association, you’ll need to add in your monthly dues.
These fees can easily add up to tens of thousands of dollars more then expected.
Closing costs are the one thing that a lot of people ignore when calculating the cost of buying a home, and this is a big mistake because closing costs can actually turn out to be quite expensive.
Unfortunately, there is no flat fee schedule, so plan on 5% of the purchase price. Closing costs vary on where you’re located, the type of home you’re buying, and your negotiations with your real estate agent and mortgage loan officer.
Worst case, you could have the fees rolled into the mortgage amount so you don’t have to have to pay upfront.
Lender fees include items like origination fee, appraisal fee, various inspections so your lender can confirm the value of the home, title examination and insurance fees. If you hire an attorney to review the paperwork, you will have to budget for their time as well.
For a rough estimate, MyFico has a closing cost calculator that you can use to test scenarios.
Your best bet is to find a reputable loan officer and talk with them about how much you should save as well as steps for getting pre-approved for a loan.