Be prepared – 4 costs that surprise many first-time homebuyers

Correspondent Lending

Knowing all the hidden costs of home buying is key to budgeting for those expenses. Here are four expenses you may not have expected.

Found your dream home? Ready to make an offer?

Now make sure you’re prepared for the additional—and often unexpected—costs of home buying.

1. Home inspection

Hiring a professional to inspect a home before closing is not always required, though most real estate experts agree that it's a good idea—even for new construction. Whether or not the inspection uncovers something that halts the purchase, this will almost always come out of the homebuyer’s pocket.

Depending on where you live, home inspection fees typically cost between $200 and $2,000. Yes, that’s a hefty price tag. But if the inspection reveals something major, you might be able to negotiate more aggressively on the purchase price—or walk away from a potential money pit altogether.

And if the inspection reveals that the home is in good shape, you’ll come away with peace of mind. Money well spent either way.

2. Appraisal

Before a mortgage lender provides a loan, they typically require an independent appraisal to verify that the sale price of the home is equal to or lesser than the fair market value. This protects both you and the lender.

But the cost of hiring that appraiser falls to you—the homebuyer. Appraisal fees typically run between $250 and $600, depending on the home, lender, and state.

3. Closing costs

Think of “closing costs” as a giant umbrella that covers everything from attorney’s fees for handling the home buying contracts to taxes and association fees. Ask about the general closing costs and loan fees when you first meet with your lender.

Closing costs can be paid for by either the buyer or the seller and, depending on the arrangement, can typically range from 2% to 5% of the sale price. If you’re buying a $250,000 home, that means $5,000 to $12,500.

4. Escrow fees

Some mortgage lenders require you to open an escrow account along with your mortgage agreement. (Escrow accounts are mandatory if you have a Federal Housing Administration loan.) An escrow account sets aside funds each month for expenses—such as property taxes and homeowners insurance—unrelated to the actual mortgage.

An escrow account may save you some stress—you won’t be worrying about a giant tax or insurance payment each year. But be aware that you might have to make an initial escrow payment (typically one-twelfth of the estimated annual bill for taxes and insurance) during closing.

Still have questions?

Whether you’re just getting started in the homebuying process or ready to take the next step, Truist Mortgage is here to help.