How Much One Time Costs You Need to Pay When Buying a House?

by Dori Tery on May 8, 2013

How to Calculate the One Time Costs?

Houses cost a lot of money! As a result, almost no one can afford to pay for house all at once. For anyone who can, the entire price of house is a one-time cost. For the rest of us, our one-time cost includes the the down payment, which is the up front money due at the time of the sale when buying a home. The down payment is the buyer’s equity or ownership share, in the house and lenders like to see a large down payment. Why? Because if a borrower stops paying back a loan, he or she loses the title to the house as well as equity. The more equity – that is, the larger the down payment – the more the borrower stands to lose by not paying, and thus the more likely the borrower is to pay.

Your down payment will vary according to the type of financing you receive. For traditional mortgage loans, they typical down payment is 20 percent. Thus, for a $250,000 home, a typical down payment is $75,000. Needless to say, that is an awful lot of money. Fortunately, for those who cannot come up with a 20 percent down payment, there are alternatives. For example, you can buy private mortgage insurance, whihc is insurance that covers the lender if you default. This will allow you to pay as little as 5 percent down.

Another one-time costs for home buyers is closing or settlement costs. Although they very quite a bit from house to house, depending n the size of the loan, the local costs, and the loan arrangements made, they typically range from 3 to 7 percent of the cost of the house. Several of the more important components of closing costs include –

Closing or Settlement Costs:

Points or discount points – Points are a one-time additional interest charges by the lender, due at closing – that is, when the sale is final. Each point is equal to 1 percent of the mortgage loan. Thus, if you get a $120,000 loan with two points, the two points would be $2,400, or $1,200 each. Lenders use these points to raise the effective cost of the loan, but points can also be used as a bargaining chip. Many times you will see trade-offs between interest rates and points – you can get a lower rate with high points or a higher rate with no points. The longer you plan on staying in a home, the more important a low interest rate is. You pay pay points only once, at closing., but you pay interest over the life of the loan. If you are planning on staying in your  home for a long time, you might be better off taking a few points to get a lower rate. If you don’t expect to be there too long, it is important to keep the points you pay to a minimum. the only virtue of points is that they are tax deductible when associated with the financing of the purchase of a home.

Loan origination fee – A loan origination fee is generally one point or 1 percent of the loan amount. Its purpose is to compensate the lender for the cost of reviewing and finalizing the loan. Unfortunately because it is not considered an interest payment, it is not tax deductible.

Loan application fee – The loan application fee, also paid to the lender, is generally in the $200 to $300 range and covers some of the processing costs associated with the loan.

Appraisal fee: An appraisal is an estimate of what your home and property are worth. Lenders require an appraisal before a mortgage loan is approved so they can be sure that they aren’t lending you more money than the value of the property. Although the costs for an appraisal vary depending on the size and location the house, an appraisal fee usually runs between $200 and $300.

Other fees and costs – There are many other fees and charges you will pay when buying a home. For example, a title search fee is paid to an attorney for searching public land records to make sure the person selling you the property really owns it. Title insurance must be purchased to protect you against challenges to the tile, perhaps due to a forged deed. There is also an attorney’s fee for work on the sales contract, a notary fee; a fee for recording the deed at the courthouse; the cost of your your credit report; and the cost of termite and radon inspection to make sure the house is in good shape.

Read more how use Mortage Lenders of America to buy your dream house.

Read more how use  to Worthington Mortgage to own a property.

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