Romina Spinnickie, Esq. *
New Jersey Tel: 973-200-8933
New York Tel: 212-537-9181
*Licensed to Practice in NJ & NY
When shopping for a house, typically your price range is determined by three main concerns. Your deposit, your monthly mortgage payment and your monthly allocation for home insurance and property taxes. Most newbies to the real estate industry understand that a cash deposit towards your dream home is required, with most purchasers seeking to put at least 20% of the full purchase down, skipping the need for PMI and reducing your monthly mortgage payment (Blog post on this to follow). Once the deposit amount has been saved and decided upon, the home buyer will need to ensure that his or her monthly income will cover all home related expenses.
But are these the only concerns a buyer should consider during the home buying experience? Absolutely not. Below is a short list of possible closing costs and fees:
Firstly, after the contract has been negotiated and signed, Buyer will need to arrange for the services of a home inspector, who will inspect the premises thoroughly and seek out any defects or damages to the property and outline all necessary repairs and/or remediation required within the premises. Typical home inspections can cost anywhere between $1000 to $1500.
Chances are you will be utilizing a mortgage to purchase the premises and will enlist the services of a mortgage broker or a loan officer at your local banking institution. Depending on the arrangement and the deal you negotiate with your broker or loan officer, some customary charges that you may incur will be an application fee, an origination fee, credit report fee, appraisal fee. Such fees will vary depending on your lender, however, you can receive a good idea of the total costs from your lending institution, through a document called a Good Faith Estimate. In addition, you will need to pay per diem interest to your lender at the time of closing, serving as essentially your first interest payment towards your loan.
Prior to closing your lender will require that you obtain homeowner’s insurance. Initially you will need to purchase insurance for the full upcoming year and such cost can either be paid at closing or prior to. Keep in mind to contact your current insurance broker handling any automobile insurance as adding another policy typically allows for the insurance agent to provide you with discounts.
As discussed in my previous blog post (What is Title Insurance?), title insurance is an integral part of the home buying experience. Not only does it serve to ensure that there are no liens, judgments and other clouds in title prior to the closing, it also gives the homeowner a method of recovery in the event that any rightful claim by an outside party is made to the property. Title insurance services include the cost of searches, typically between $500-750, and the issuance of a policy. In most states, such as New Jersey and New York, the cost of the policy is regulated by the state and based on the purchase price of the property. These guidelines are readily searchable online and sites will offer online calculators to determine the cost.
The assistance of an experienced real estate attorney is an essential tool in any real estate purchase. An attorney will help you through the intricacies of your contract negotiations, clearing of title and as a settlement agent for your mortgage and property closing. A knowledgeable attorney will serve to alleviate your concerns during this process and provide you with the safeguards and information you need to ensure a smooth transaction.
While I hope the above list has served to provide you with a good background on expected costs, there may be additional costs to consider. In addition to the above, please make inquires with your realtor regarding any condominium, cooperative and homeowner association costs and fees as well as any reimbursements to the seller’s for taxes and/or utilities already paid.