I teamed up with Lender, Shikma Rubin, to come up with a list of costs buyers can expect when they enter into a contract (or shortly thereafter) to purchase a home. We have explained what they are but if you have any questions, make sure to ask!
1. Earnest Money Deposit (EMD) accompanies the initial offer submitted to the seller. It shows a good faith commitment that the buyer is to execute the contract to the best of their knowledge. 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.
Tip: If paying the EMD by certified funds make sure the bank makes the check out to the company who is holding your escrow OR your name to avoid any fees to cancel or re-deposit the check in case contract falls through. Ex: THF Title OR Your Name. Also, make sure that you keep all receipts.
2. Home Inspection: Many homebuyers can opt to have a home inspection as a condition to moving forward with the contract. The home inspection is for the buyer to know if there are any repairs needed on the property. After the inspection is complete, the buyer has three choices:
- Move forward with the contract as-is
- Walk away from the contract
- Negotiate with the seller on repairs to be completed prior to closing.
Home inspections are about $400, but can vary based on square footage and age of the home. The buyer pays the home inspection company directly and that fee cannot be credited towards loan costs.
3. Termite and Moisture 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 can sometimes be negotiated to be paid for by the seller. For VA loans, the seller has to cover this fee.
4. Appraisal is a requirement by the mortgage lender to verify home’s market value for at least the negotiated sales price. The appraiser may note that some repairs be complete prior to closing to satisfy lender guidelines. Also, if appraiser determines the value of the property to be lower than agreed upon sales price, the buyer is not obligated to complete the contract. The buyer and seller can also negotiate different terms to contract to follow through with the sale. Appraisal are paid for at time of loan application between $450-500. If negotiated, this cost can be covered by the seller at closing.
5. Credit Report: Your credit report pulled by the lender to determine credit eligibility. You will recieve 3 scores, one from each credit bureau- Experian, Equifax, and Transunion. Your credit report will also show all your current and previous credit accounts and your payment history. The report will also show any public records, collections, and recent inquiries. The credit report fees may be collected upfront by lenders, about $50.
6. Survey: An assessment of property lines (metes and bounds) to determine the exact amount of land that a homeowner owns. Surveys show any easements or encroachments on a property that is noted on the title of the home. It’s important to get a property surveyed after an offer is made to make sure any issues with easements or encroachments are documented on the title and resolved before closing. You will arrange to get a survey through your closing attorney’s office. It will run about $350.