Pinpointing The Veiled Costs Of A Real Estate Purchase – Guest Post
Oftentimes people associate a real estate transaction with a lump sum down payment followed by monthly dues. While these ideas are surely components of buying a property, they are only the tip of the iceberg. The acquisition of real estate is much more complex than it appears, and too many people dive head first into the situation without knowing the true depths of the decision.
Below are the hidden costs of a real estate transaction that are commonplace within the industry. Consider these expenses prior to settling on your decision. Most of them are less than substantial monetarily on the scale of real estate, but when assessed cumulatively they can be a burden on your precious resources. Buying a house is dream for most people, but it’s a process that requires and deserves calculated attention.
1. Mortgage application fee
This fee varies by situation and can either be a flat fee or a percentage of the mortgage. It’s often 1% of the borrowed amount, so a house costing $200,000 would demand a mortgage application fee of $1,900 if you put down a $10,000 down payment. Again, this fee is somewhat minimal on the scale of real estate, but if you’re cutting it close it’s very substantial and often unexpected.
Advice: You should avoid paying the application fee up front. The reason is because it’s usually nonrefundable, and if you happen to stumble upon a sketchy broker they could just take your money and walk. The exception is if you have bad credit. In this case a lender might require a fee up front to cover the associated costs of your more complex application.
2. Appraisal fee
Although getting an independent appraisal on a property is meant to protect both you and the lender from above market prices, it’s still an under recognized fee. This charge is usually several hundred dollars, depending on the specific geographic location and size of the house.
Advice: It’s important to understand that appraisal fees have been implemented to help you, but they also cost something. It’s just another fee to tack on to your list of expenses that usually don’t get factored in to the equation.
3. Mortgage insurance
Mortgage insurance is the safety net that protects the lender in the case that you default on the mortgage. Again, many people understand that mortgage coverage is necessary, but they often underestimate the expense of it. This insurance can be both private and public, private usually being the option if your down payment is less than average.
Advice: Make sure to take this into account, specifically the decision of how you want to spread out mortgage insurance payments. It’s common for people to be presented with multiple options where payment is concerned, and it’s wise to apply those options to your individual situation before agreeing on anything.
4. Land Survey
A land survey is part of the process for many homebuyers, if not all in certain states. If you’re considering adding anything to a prospective property, it should be a mandatory step in your process. You want to know the exact boundaries of your property so that you know what you’re buying and also where the limits are for you to build or add any features. These surveys can cost anywhere from a few hundred dollars to upward of $1,000. It’s likely a wise decision for you to carry out this step in the process, but the expense is something to take note of.
Advice: Depending on the age, geographical location and type of your lot, these surveys can be more or less necessary. You will make the final call on whether or not it’s essential, but it’s worth considering the fees associated with the decision.
Most people understand that the physical process of moving their possessions from one home to another will be a hassle. What they often underestimate, however, are the financial implications of the physical move. Whether it’s moving trucks, storage for any idle period or temporary lease agreements, among other costs, they add up.
Advice: Try and understand that the timing and specifics of your physical move can be deciding factors in the overall financial hit you take with the transition. Try and plan your move to decrease idle time and limit moving any unnecessary possessions.
Acquiring real estate is worth every penny. However, it’s such a large-scale transaction that it surely helps to save money where you can. While certain expenses like the ones above are often compulsory for a successful purchase, calculated planning and efficient communication help reduce them and keep money in your bank account.