Interracial Couple Discussing Buying First Home Together While Drinking Coffee In Kitchen

11 Fees You’ll Have When Buying A House

Lauren Nowacki4-minute read
November 16, 2021

When buying a house, people often plan for the obvious fees: the sale price and the down payment. But there are several other fees associated with buying a house you may not be thinking of. If you don’t plan for them, you could strain your finances, or discover that you’re not as financially ready to purchase a home as you thought you were.

Before you decide if you should buy a house or wait and save up, it’s important to learn about all the fees associated with buying a house.

11 Fees Associated With Buying A House

While down payments and mortgage fees are the biggest costs associated with homeownership, the additional costs on this list can add up. Make sure you also factor these costs in when deciding how much home you can afford.

1. Closing Costs

Closing costs for a mortgage include all the expenses involved in the purchase of your property. Closing costs are typically 3% – 6% of the home’s total value, and are typically out of pocket expenses. This means that you’ll be asked to pay for them upfront rather than through your loan.

2. Appraisal Fee

A home appraisal is often required by lenders to ensure you’re requesting the right amount to finance the home and the amount of risk associated with lending that amount. The fee is paid to a third-party appraisal company, which conducts the appraisal, and usually costs between $600 – $2,000. The amount will depend on the size of the home, the home’s location, the availability of appraisers in the area and the time and work required for the appraisal.

3. Credit Report Fee

Mortgage lenders look at your credit score and history to help determine whether you qualify for the loan and what the terms of your loan will be. Some lenders will charge a small fee in return for running a credit score report, which is usually around $20 – $30.

4. Home Inspection Fee

A home inspection is an important part of the home buying process because it ensures you’re purchasing a healthy home and making a good investment. A certified inspector will review the home and let you know if anything needs to be imminently fixed or if there’s damage that you’re not aware of. They may also check for pests, lead-based paint or flood damage.

Home inspection costs are typically paid to the inspector on the day of the inspection.

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5. Title Search

A title search involves analyzing property records to make sure there’s no lien on the property or any other discrepancies. The title company typically charges a small fee for looking up the property title in public records. While the cost will depend on the location of the property, you can expect to spend around $75 – $200.

6. Origination Fee

A mortgage origination fee is what the lender charges to process your loan, which includes organizing and completing mortgage documentation and underwriting. This fee typically costs 0.5% – 1% of the loan amount.

7. Earnest Money

Earnest money is a commitment to the home sale. It’s money you, the buyer, put into an escrow account, where it’s held until all parties complete the necessary steps to finalize the sale. Once all the conditions in the transaction are met, the money is released and applied to your down payment or closing costs. Earnest money deposits protect all parties involved in the sale, and are typically 1% – 2% of the sale price.

8. HOA Fees

Most condos, apartments and some neighborhoods have a homeowners association (HOA), which helps provide services, social activities and amenities to residents in the association. Of course, these things cost money, so residents are charged HOA fees. Most HOA fees are monthly expenses and usually cost between $200 – $500 per month. Depending on the association and when you move in, there may be some fees you pay at closing.

9. Private Mortgage Insurance (PMI)

You may not be required to have a down payment of 20% of the purchase price, but if you can’t put that much down, you’ll be required to pay private mortgage insurance (PMI). This fee can be up to 2% of the loan annually and protects the mortgage lender if you default on the loan.

PMI is common for first-time home buyers and stays in effect until the remaining principal balance on the mortgage falls below 80% of the home’s value. After you’ve paid off at least 20% of the home’s value, your lender should automatically cancel PMI charges.

10. Homeowners Insurance

When getting a mortgage, you’ll likely be required to provide proof of homeowners insurance. Homeowners insurance is important because it protects your investment and saves you money if there’s damage to your home or the assets within it. If the home is damaged or destroyed, this insurance will cover most or all of the costs to restore it.

The cost of homeowners insurance depends greatly on the age and type of home you have, where you live, what you want covered and if your home features any additional risks, like a swimming pool or wood-burning stove. The average cost of homeowners insurance per year is $1,585, but it can fluctuate based on the state you live in.

11. Property Taxes

Your state and county impose property taxes, which go toward paying for local services and amenities, like schools, parks and police and fire departments. Rates vary by area and taxes change every year. The taxes you pay may go up over time depending on factors such as roads needing repair, states cutting funding, home value increases or real estate market changes.

To get an estimate of how much you’ll pay in taxes, you’ll need to find your property’s assessed value and your municipality’s millage (mill) rate. Divide the mill rate by 1,000, then multiply that number by your home’s assessed value.

For example, if your home’s assessed value is $250,000 and the mill rate is 6. This is how you’d get an estimate of what you’d pay:

6/1,000 = $0.006

$250,000 $0.006 = $1,500

Your property taxes would be about $1,500.

The Bottom Line: Buying A House Requires Upfront And Ongoing Fees

While your down payment and your mortgage payment are big expenses to consider when buying a home, there are several other fees that, when added up, can also require a big chunk of change. The best way to prepare for these costs is to learn what they are, why they’re included and about how much they are, on average.

This list may seem extensive, but it doesn’t even cover all fees associated with buying a house. There may be additional fees based on your financial situation, location, agreement with the seller and other factors. Learn about the additional, ongoing fees that factor into the true cost of homeownership to make sure you’re financially prepared before buying your home.

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Lauren Nowacki

Lauren is a Content Editor specializing in personal finance and the mortgage industry. Her writing focuses on reporting the best places to live in the U.S. based on certain interests and lifestyles. She has a B.A. in Communications from Alma College and has worked as a writer and editor for various publications in Philadelphia, Chicago and Metro Detroit.