First Time Home Buyer Tips

When you’re buying a house, you have the sales price, that’s the amount that you’re paying for the property, but if you think that’s the only thing you’re spending money on, I’ve got some bad news for you. Fees, points, credits, escrow, title, there can be so many extra and hidden fees that you go in thinking one number, and you end up paying a lot more so because of that, in this article I’m going to go through the top 10 HIDDEN costs that people don’t tell you about, or maybe they do, but they’re not as well known as just the sales price. Now, this won’t be about hidden fees once you buy the house and start living in it, more of hidden fees when it comes to acquiring the property. So with that being said, let’s look at the top 10 hidden fees of purchasing a house.

Fee number 1 is the home inspection. Wait, you already know about the home inspection, so why am I including it on the list. Well, what you might not know is that you pay for the home inspection immediately, as opposed to at closing, and the home inspection could cost up to $800 depending on the size of the house. It’s important to use a reputable company and inspector. Some real estate agents will push you to use their inspectors that they have a relationship with already. Be aware of this. You don’t want to wear your tinfoil hat thinking everyone is conspiring against you to cover up items on the home inspection. But at the same time, you probably don’t want your real estate agent to be best friends with your home inspector, that doesn’t look good either. The company that I use is US Inspect. This is not an advertisement for them nor was I paid to say this, I just have used them in the past and they have been very thorough.

Fee number two is the appraisal. A common theme that you’ll notice here is that once you go under contract, you’re going to have to start paying money. Some of the items we’ll discuss are fees at closing, but the appraisal fee is one that is due upfront. The D.lender usually requires this to be an upfront payment because even if the loan does not move forward, the appraiser still needs to be compensated. Expect an appraisal to be approximately $400 – $500.

Fee number three is the Earnest Money Deposit. Now, wait, this one is not so much a fee, as it is money that is due upfront that some may not know about. When you submit your offer, in its simplest form, you’re just sending over a piece of paper to the other side saying that you’ll do something. Well, the sellers need more commitment than that. You got to have some skin in the game. You need to submit your Earnest Money Deposit, commonly referred to as your EMD with your contract. This is an amount, usually 1. 5% to 3% of the sales price that is put into escrow and is a good faith deposit that you will go through with the contract. The higher your deposit, the stronger your offer. The EMD will end up going towards your closing costs, but it is due upfront when you submit your offer so be sure you and your agent have a game plan and are ready for the EMD at the time your offer is written.

Fee number four is title insurance. Ahh title insurance, everyone’s least favorite real estate topic. The long and the short of it is this: You probably don’t need it. Just like you probably don’t need health insurance for 6 months, you could probably skip on dental insurance for a year. You probably don’t need car insurance for a year. That last one might be a crime now actually, so don’t quote me on that. But if you’re buying property for $400,000, $200,000, or however much money, you need to do what you can to protect your investment to make sure that no other parties could legally take that property away from you. Because if someone has a lien on that property and you don’t have title insurance that found that out, you might be in some trouble. Title insurance is going to cost about at least $1,000 for lender’s title insurance, and then another $1,000 for owner’s title insurance, this is paid at closing. I’m always going to buy title insurance with properties I purchase just to be on the safe side and I will probably not be happy about paying those fees for it.

Fee number five is the county transfer tax. Whenever you buy or sell property in a jurisdiction, that jurisdiction is going to take their cut of the pie. Now it may only be small cut of the pie, maybe just the crumbs, but hey, that’s your hard-earned money so every little bit matters. It’s going to vary by jurisdiction, but a recent $400,000 property my buyers purchased had a County Transfer Tax of $350 and a County Mortgage tax of $300 totaling about $650 in fees.

Fee number six, I’m going to sound like a broken record but it’s now time for the State Transfer tax. States going to get their money too and it’s going to be a little bit higher. Obviously the state transfer tax will differ by state, but here in Virginia using the same $400k property, the state transfer tax came out to $987. 50, which is 25 cents for every $100 worth of property. Or to make it easier, . 0025 of the sales price. Let’s also not forget about the State Mortgage tax, which is about the same percentage before, that. 0025 of the mortgage not the sales price, so of the mortgage. So on that $400k property, we have $987. 50 in-state transfer and $969. 75 in State Mortgage totaling $1,957. 25. That’s almost $2,000 in fees right there. Some states do not have a state mortgage tax so be sure to check in with your local lender to see if these numbers will apply to you.

Fee number seven is property tax. Lots of taxes here. These are paid at closing and are usually pro-rated for half the year because around here most jurisdictions require you to pay property taxes bi-annually. You can easily look up your city or county’s property tax by going on your jurisdiction’s property tax website. One thing to know is that property taxes are based on the value of the home. So if the sales price you buy your house is more than what it was last sold for, which is usually the case, your property taxes will be going up in the future.

Fee number eight is your homeowner’s insurance premium. The average homeowner’s insurance premium is about $1,000. Unless you’ve done something differently, you can expect to pay this at settlement. Remember, all jurisdictions could be different so be sure you’re in touch with your lender and settlement company to see which items are billed at settlement.

Fee number nine is your HOA transfer fee. If you a purchasing in an HOA, a fee may be due at settlement. And that fee could be up to $300. What does it go towards? Setting up your account, putting you in the system, and that’s about it. If you’re like an HOA president or treasurer or something you might get mad at me for this part but it’s basically a couple of hundred bucks that you’re going to pay and not really get anything back of value. It is what it is.

Fee number 10 is the title services. These are things like the settlement fee, the title abstract, the title insurance binder, and the title closing protection agency. And you can look up all these title fees on your own. That’s not the point of listing them out. The point of listing them out is that this is an additional $550 on top of all the other fees that we’ve covered. And maybe you’ve come across companies or maybe you’ve thought to yourself that you’ll negotiate with the title companies and get them to waive their fees but that’s how they make money. There’s one title company in my area. I think they charge a flat rate of $250 to close. And you need to ask yourself. Do you really want to get the cheapest real estate attorney out there? You’re buying a home. Do you really want to try to save $50 or $100 to get the least expensive company? Title companies have their fees. Some are higher than others.

Try to get a few good recommendations before choosing a title company. Most of the settlements I do now are split settlements where the buyers have their title company and the sellers have. Be sure to do your research because like most things, even real estate attorneys, you get what you pay for. And bonus, we have a bonus hidden fee. The 11th hidden fee when buying a house is for condos and that is your condo move-in fee. I will put in another disclaimer that this will vary by condo and by association. But many condos include the move-in fee at closing. This is going to be anywhere from $100 to in some cases $700 to move-in. If you’re purchasing a condo, your move-in fee, if you have one, is probably going to be anywhere from $100 – $300. There you have it, the 10, or make that 11 hidden fees to buying a house.

Your Favorite Realtor – Nicole Anthony – Keller Williams Realty
Browse our Chattanooga homes for sale listings.

Today I’m going to be talking about five homebuyer mistakes that first-time buyers commonly make that can cost them thousands of dollars, or even to lose out on the home that they love! Don’t make these mistakes. Hi there, my name is Emily Farmington and I’m a Realtor® with Keller Williams, Realtors® in Nashville. Tennessee. Thanks for reading this article. If you are a first-time homebuyer I have the perfect guide for you and it’s totally free!

Alright, let’s talk about some big mistakes you don’t want to make when you’re buying your first home. Number one, not getting pre-approved. Listen to me carefully on this one. I know there are some flashy websites and online calculators that will claim to give you an idea of what your budget may be, but none of that matters a lick. The only thing that truly matters when you’re in the market to buy a house is getting pre-approved from a lender. That lender is going to take a look at all of your qualifying factors and give you a very good feel for what they are willing to lend you. Now you don’t have to spend up to the top, certainly not, but that is going to be the framework in which you are shopping. If you are not pre-approved and you are out looking at your houses, you are wasting your time, you’re wasting your agent’s, time, and you’re wasting the seller’s time. If you are not pre-approved no seller is going to take your offer seriously. And, furthermore, you are simply not going to be able to compete with other serious buyers in the market.

Number two, messing up your DTI, your debt-to-income ratio. So say you have been smart, and you’ve gotten pre-approved, you’ve been working with a lender. That lender has pulled all sorts of data points about you in order to qualify you for a mortgage up to a certain amount. Things like your debt, your income, your credit score. If you get into a contract on a property and then you go out and you start making financial decisions like buying a new car, financing a boat, going to a furniture store and buying a whole new suite of furniture for your fabulous new home, applying for in-store credit cards *gasp*. Don’t do any of that! Those are the sorts of things that can mess everything up, throw it off the rails, and mean that you will not be buying the house that you are in love with because all of those things could mess up your debt-to-income ratio, especially if you’re squeaking by the hair on your chinny-chin-chin. Always, always talk to your lender before making any major purchases, and best practice is to just hold off until you are holding those keys in your hot little hand.

Number three, internet lenders. It has been my experience that local lenders will beat Internet lenders any day, any time. Now I know that internet lenders can have some attractive looking websites, and they may be advertising an interest rate that looks especially appealing. And, it can also be appealing to not actually have to talk to a real human being about potentially sensitive financial information. Maybe you’re just feeling a little shy, a little squeamish about it. I get that, but talking to that real human being in the form of a friendly local lender is going to save you money over time. They have very competitive interest rates, low fees, low closing costs, they have a vested interest in making sure that your transaction crosses the finish line, and they can help you with all sorts of other things like credit repair, and personal advice that applies to your local area.

Big mistake number four, not committing to a Realtor®. I know. I know! Sometimes Realtors® can seem a little salesperson-ish. I get it. I’m not a big fan of salespeople myself. That’s why I don’t consider myself to be a salesperson, rather a consultant, But I digress! all realtors are not the same. Maybe you think it would just be easier to look online and give the agent a call if you happen to be interested in that house? But wait! When you do that it is important for you to realize that that agent is representing the seller, and if you were to decide to move forward and write an offer on that house, that agent, who is representing the seller, is now going to be in the state of dual agency where they are representing both sides. When you commit to a Realtor®, and you have chosen one carefully, you can bet that that Realtor® is going to work like a bloodhound to get you what you want. Did you know that a significant number of homes are sold before they ever even hit the open market? The reason for that is that listing agents may have a pocket listing, or a private listing. The only agents who will know about that private listing are agents in the know. Like your agent, who you committed to. Another reason for that is that when an agent takes a new listing contract, they’ve signed the paperwork with someone who wants to sell their house, there’s rules regulating the amount of time between when they take that listing and when it used to go on the MLS. What do you think is happening in those 3 days between getting that listing contract signed and it going on the MLS?! Well, I can tell you. A whole heck of a lot of talking and showings between agents. If you want in on that behind the curtains scene you need to be committed to a Realtor® who is well connected.

Mistake number five, looking for a unicorn. I know, I know, we all have a vision in our mind of what our insta-perfect house is going to look like, but news flash, chances are that house doesn’t even exist or its twice your budget. Oh, the tragedy! I know! We all have our list of needs and wants but you have to be realistic about what your budget will buy you. Instead, try to focus on the things that cannot be changed like the location or the overall structure of the house. So many things can be changed and they can be changed relatively inexpensively. Paint, floor coverings, light fixtures, all of those are projects that most people can handle. I always tell my buyers about the 80% rule and it goes like this: when you have found a house that means 80% of what you want, 10% of what you can change, and 10% of what you can live with, you’ve found a really good house! Now I’m not trying to tell you to rush into things. Taking your time is good, especially when you are in the beginning stages of your first home purchase. But, if you’ve been looking for a while and you haven’t found anything that’s a strong possibility, chances are you need to readjust either your expectations or your budget.