It is no secret that purchasing a home is expensive. However, there are many hidden fees that potential homeowners overlook because they are not commonly revealed. Below are six of the most common hidden fees you will encounter when purchasing a new home: appraisal fees, title insurance fees, state recording fees, origination fees, private mortgage insurance fees, and escrow fees.
Appraisal Fee: Many home buyers get hit with a fee for the appraisal because a current appraisal is necessary when buying a new home. This is so that the taxes can be correctly established for the new homeowners to pay. It is a frustrating fee that is very often overlooked but one that almost all new homeowners encounter.
Title Insurance Fee: This is insurance that many are unaware of but it helps to cover the purchase in the rare case that the person who sold the home was committing some sort of fraud. In other words, the person did not actually own the home. While it is rare for this to occur, if it does occur the results are devastating so title insurance is vital.
State Recording Fee: This fee is not a requirement in every state so call your state offices or check their websites to determine whether or not it applies to you. This fee is when states charge to record information regarding the sale of the home to keep within state records. It may involve the title itself or possibly just details of the sale.
Origination Fee: Origination fees are generally 1% of the cost of the home and often written right into the loan itself. These fees are paid directly to the bank or whoever it is that is lending the money. This 1% is the way that the bank or lender gets paid for their services and their involvement in creating the loan itself.
Private Mortgage Insurance: Not everyone is hit with this fee but if only a small amount was used for a down payment then most people are required to provide private mortgage insurance. This is so the lender is confident in your ability to continue to pay because you have private insurance on the mortgage itself.
Escrow Fees: When the closing process is going on and the seller is finalizing everything, money generally has to be held in escrow. Money for the mortgage often goes into escrow as well which means further fees are accrued. Escrow fees are often unexpected because those new to purchasing homes overlook this fact.
It is important for potential home buyers to educate themselves on these fees as well as any other potential hidden fees that might be specific to their scenario. Being prepared to pay these fees makes purchasing a new home a more streamlined process.