If you hope to buy a house in Whatcom or Skagit County in 2018, it’s important to understand all aspects of the mortgage process. That means you need to have a clear picture on various fees that come along with buying a home.
Here are five costs you will encounter. These fees should not deter you from the process but rather make you better prepared when they arise. The fewer surprises along the way, the better.
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1. Earnest money deposit
The EMD accompanies the initial contract offer submitted to the seller. It shows a good faith commitment that the buyer is willing to execute the contract at the price and terms agreed upon. The EMD should preferably be a personal check or a cashier’s check from your bank. The amount of money for the EMD can vary depending on sales price of the property.
2. Home inspection – Many homebuyers can opt to have a home inspection as a condition to move forward with the contract. The home inspection lets the buyer know if the property needs any repairs. After the inspection is complete, the buyer has three choices: move forward with the contract as is, walk away from the contract, or negotiate with the seller on repairs to be completed prior to closing. Home inspections cost around $400 but can vary based on square footage of the home. The buyer pays the home inspection company directly and that fee cannot be credited toward loan costs.
3. Termite and moisture inspection – The inspection is required by most mortgage lenders to confirm that the property is free from wood-destroying insects, moisture damage, etc. If repairs are noted, they will have to be addressed prior to closing. This inspection costs about $75-$125 and the seller can sometimes pay the fee through negotiated terms. For Veterans Affairs loans, the seller must cover this fee. This fee may be included in your normal closing costs, but at times may be required to be paid upfront.
4. Appraisal – A requirement by the mortgage lender to verify the home’s market value for at least the negotiated sales price. The appraiser may require some repairs be completed prior to closing to satisfy lender guidelines. Also, if the appraiser determines the value of the property to be lower than agreed-upon sales price, the buyer is typically not obligated to complete the contract.
The buyer and seller can also negotiate different terms to the contract. Appraisals are paid for at the time of the loan application and cost between $450-$600. If negotiated, the cost can be covered by the seller at closing.
5. Credit report – Credit report fees may be collected up front by lenders. Lenders want to see that the borrower has a solid history of paying debt on time and in a consistent way. That’s why they refer to a credit report which provides an in-depth look at the borrower’s entire financial history. That history includes types of accounts and any derogatory activities like late payments, collections and other public judgments. Credit report fees may vary and typically cost between $25-$50.
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When buying a home, knowledge is power. Understand the upfront fees, and you will be better prepared to purchase your own home in 2018. Talking to an experienced agent in your area will not only give you a better idea of local costs involved in your purchase, but they can refer you to licensed, insured, and trusted local contractors. Feel free to contact me if you'd like to know more!
This article was written by Shikma Rubin, loan officer, Tidewater Home Funding