What Buyers Forget When Buying A Home

When you’re buying a home, there’s a lot of excitement that surrounds the search and purchase of the property. In the process of buying a home, however, there are many things that buyers forget to take into account during their search and budgeting. Below, you’ll find some information to help you be prepared as a buyer to consider your home purchase from all angles without missing a beat.  

The Expense Of Closing Costs

Remember that closing costs will be somewhere in the 3-5 percent range of the purchase price of a home. Amidst all of your savings, you’ll need to consider this a part of your expenses. Closing costs need to be paid upfront in most cases. You can roll your closing costs into the financing, but it depends on the circumstances. There are no guarantees that the lender will agree to it. Your realtor can also sometimes negotiate for the sellers to pay the closing costs, but in a seller’s market this is quite rare. Be prepared with your closing costs and understand how much you’ll need to spend so that you have an appropriate amount for the downpayment and the other expenses that you’ll incur during the process of buying a home.  

The Cost Of Maintaining A House

Many buyers forget about all of the costs that they will need to pay for after they finish buying the house. In addition to a monthly mortgage payment, you’ll need to pay for things like utilities, routine home maintenance, furnishings, and more. If you completely deplete your savings for the purchase of the home, there’s not a whole lot of wiggle room for you to pay for additional needs in the house. 

The Cost Of Furnishing And Decorating A Home


You may move into a home with a few pieces that you have previously owned. You could also need a lot of things from a bed to a sofa. All of these items can add up. You may even have to worry about little things like window shades, curtains, lamps, light bulbs, and more. 

Home Repairs Can Cost A Pretty Penny

If something needs to be done in your home, the repairs can cost you quite a bit. If you’re not paying attention during the home inspection, you’ll be in for some surprises. That’s why you need a good realtor to help you through the process. A new roof can cost thousands of dollars. New appliances are an expense you should plan for. Other major work that needs to be done around the house can also dip into your savings significantly. As a buyer, you need to be prepared for any of these expected or completely unexpected costs.           

How to Save on Closing Costs

Buying a home is probably the largest purchase you will make in your lifetime. In spite of down payments and monthly mortgage dues, you’ll also have to plan for the fees that come with purchasing a home. These expenses are collectively known as closing costs.

Just how much can you expect to spend on closing costs when buying a house? Experts say that closing costs amount to anywhere between 3 and 5% of the cost of the home. So, if you buy a $250,000 home, you could pay as much as $12,000 in closing costs and associated fees.

Coupled with a down payment that is due at the time of signing, closing on a home can get very expensive very quickly. But we’re here to help you understand the cost of closing and how you can potentially cut some of those costs that are due at the time of signing. Read on to learn how.

What are closing costs?

There are dozens of possible expenses that may come up at the time of closing. Depending on your unique situation, you might pay for several or just a few of them. Some common closing costs include:

  • Mortgage application fee. This fee describes the cost of processing your mortgage application. Be sure to go over everything that this fee covers with your lender.

  • Attorney fee. While this fee may not always be required, it is a good idea to have an attorney review your mortgage and related documents and contracts.

  • Property tax. It isn’t out of the ordinary to be asked to pay the first or first two months of your property tax at the time of closing.

  • Insurance premiums. Flood, fire, and mortgage insurance premiums may all be required to be paid at the time of closing as well.

  • Home inspection. It’s not a legal obligation to inspect a home before you buy it, but it can save you thousands of dollars in repairs if an issue is discovered after you already sign on a new home.

  • Origination fee. Not all lenders charge an origination fee, but can expect to pay up to 1% of the value of the home to cover the lender’s administrative expenses.

  • Transfer tax. This is the tax for when a property changes ownership. Each state and county charge different amounts, with some states charging no transfer tax at all.

  • Underwriting costs. This is another fee charged by your lender for the work they do to ensure you are safe to lend to.

Where you can save

We know what you’re thinking: that’s a lot of fees. The good news, however, is that you likely won’t end up paying every closing cost there is, and sometimes closing costs are negotiable.

Here’s our advice on how to reduce closing costs.

  1. Shop around. Find a lender that offers a closing cost that you’re comfortable with. Ask the lender for Good Faith Estimate (GFE). The lender is obligated by law to provide a GFE within three business days of applying for a loan.

  2. Negotiate with the lender. Since you haven’t signed on the loan yet, you still have the power to negotiate. For best results, try to negotiate the smaller and more obscure fees; those that aren’t as common with other lenders are more likely to be reduced or removed.

  3. Negotiate with the seller. Some costs may be negotiated with the seller depending on quickly they would like to sell the home. Negotiate things like inspection fees or transfer taxes with the seller. Or, bring up the closing costs with the seller and see if they will reduce the price of the home to accommodate for some of the closing costs. 

How To Reduce Closing Costs

You already know that closing costs on a home can come at a hefty price. There are a few ways that you can actually cut down on the amount of closing costs that you may have on a home. 

Compare The Costs

You have the right to shop around for a lender who offers the lowest closing costs. You can even ask your lender to match the closing costs of another lender that may have them for a lower fee. Certain fees that are included in the closing are negotiable and flexible. You’re allowed to shop around for inspections, title searches, surveys, and the like. There’s nothing that says you have to go with the company recommended by your lender for each. There should be a list of services that is included in the closing costs on your estimate that you receive form the lender.

Question What Each Fee Covers

When you get the loan estimate, don’t just accept it. Take a look at each item and inquire what the fee includes. See why each item costs as much as it does. Be on the lookout for fees with similar names. The lender could be double charging you without your knowledge. It’s always good to be informed especially where large investments are involved.        

 

Negotiate

You have the right to negotiate with your lender on the closing costs. You can ask for obscure and unnecessary costs to be taken off from the closing. Getting the closing disclosure form as soon as you can will also help you to settle any discrepancies before it’s too late. 

Ask The Seller

Some sellers will even be willing to sweeten the deal for you by either lowering the sale price of the home or covering some or all of the closing costs. Depending on the market, you may be able to get the seller to help reduce your burden of the closing costs. 

If You’re Refinancing 

Every time that you refinance your home, you’ll need to pay closing costs. There are a couple of ways that you can save in this situation. One is to waive the appraisal altogether. If the home has recently been appraised, you may be able to waive the appraisal completely. You can also request an automatic appraisal rather than a full appraisal in order to save some money.

The other option that you have when refinancing to save money is to save on the title insurance. You can ask for what’s called a re-issue date, which is a less expensive rate for the title insurance for refinancers.

Closing costs are a part of the process when you buy a home. If you’re careful, you might be able to save some money on these mandatory fees.