You might only think about the purchase price when you’re preparing to purchase a home in Albuquerque, but that’s only part of the story. Buying a house involves much more than your mortgage payment. When calculating your budget and how much home you can afford, don’t forget to take other fees and expenses into account.
Buying a house requires a down payment in cash, upfront. A 10% or 20% deposit is usually required. Down payments are required for FHA and conventional loans. Down payments for conventional loans vary depending on the lender. There are some loans that require as little as 3% down payment. VA loans and USDA loans have stringent requirements but don’t require down payments.
Origination and Application Fees
When you get a loan from a bank, you have to pay an origination fee. A loan origination fee is payment made for services rendered during the loan creation process. There may also be an underwriting fee and an application fee. Your credit report can also be charged by the lender.
The origination fee can range from 0.5% to 1% of the loan amount. Occasionally, origination fees are negotiable. Origination fees are sometimes called points or discount fees.
The origination fee and the application fee are often combined as closing costs. Typically, closing costs range from 2% to 5% of the purchase price.
While title fees are included in closing costs, some new buyers aren’t aware of them, so it’s worth discussing them separately. The title transfer fee is the cost of transferring ownership of a home from the seller to the buyer.
For example, you might have to pay for a title search. You will be charged for the cost of searching property records to make sure there is no other claim to the property you want to purchase.
Buying a home requires two types of insurance. In addition to homeowners insurance, there is private mortgage insurance (PMI).
You will be protected if your home is damaged by homeowner’s insurance. Your homeowners insurance might cover your losses if you were the victim of theft or a natural disaster.
In most cases, lenders require PMI if you make less than 20% down payment. Lenders use PMI to protect themselves. Depending on the amount of your loan, your PMI premium could range from .58% to 1.86%. PMI can be eliminated once you build equity in your home by paying down your mortgage.
At closing, you may be responsible for taxes. When you close, you usually have to pay two months’ worth of property taxes. As most homeowners pay their property taxes in advance, you may need to reimburse the seller. There’s also the potential you’ll have to pay a transfer tax. This is a tax for changing the title to the property. The amount you’ll pay in transfer taxes depends on where you live, and sometimes this is shared by both the buyer and seller.
Appraisal and Inspection Fees
In order to get a mortgage, you’ll need an appraisal. An appraisal gives an estimated value of the home you’re going to buy. Lenders require it so that they know that you’re not overpaying for a home. Appraisal fees range from around $300 up to $1,000.
A home inspection fee is separate. A lender might want an inspection or you could want one for your own peace of mind. Inspection fees range from $300 to $500 most of the time. If you’re buying an older home you could also opt for a mold or pest inspection, each of which can be upwards of $200.
As you can see, there’s a lot to consider when it comes to buying a home. Sandi Pressley and her team will make sure you understand all the costs involved in buying a home in Albuquerque.
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