Closing costs are out-of-pocket expenses paid by a homebuyer before the property transfer is finalized.  Many expenses are associated with buying a home in addition to the cost of assuming a mortgage.  Closing costs can vary significantly from one transaction to another, and often depend on a number of factors, including the price of the home, the area in which you are buying, and the type of mortgage that you have selected.

Yet closing costs are not the only upfront expenses that will need to be paid when you are purchasing a home.  You may be required to make a down payment, pay for a home inspection, cover escrow fees, make advance deposits, and incur other types of miscellaneous costs.

Realtors are knowledgeable about the out-of-pocket costs that buyers face when purchasing a new home.  The have extensive experience dealing with closing companies, different types of mortgage programs, and escrow accounts. Therefore, your realtor can be a source of valuable information about buyers´ costs.

This list of possible fees covers many of the items for which you will need to have cash on hand, although it may not be an all-inclusive list. Fortunately, you probably will not be subject to all these types of costs. The specific costs will depend on your particular situation.

Closing Costs
Closing costs are those costs paid by the buyer to the closing company that finalizes the home-purchase transaction. Some sellers will offer to pay a portion of the buyer´s closing costs. In addition, some mortgage programs will offer funding for closing costs, often in the form of a second mortgage or a line of credit.

Down payments are not considered to be part of the closing costs, even though they are generally due on or before the date of closing. Again, assistance programs are available for paying these costs.  Particularly if you are a first-time buyer, it makes sense to research all the available options.

Your realtor can offer extensive information about specific first-time homebuyer assistance programs and can assist you in determining whether the seller is willing to assume some of your closing costs.

Down Payment
A down payment is usually required by your mortgage company.  Some lenders may have special loan programs that offer a 0% down payment. However, you can generally assume that you will be responsible for providing at least a small percentage of the home´s cost as a down payment.

There are federal and state restrictions on the sources of funds that a buyer can use for a down payment.  Lenders may have additional criteria and restrictions.  To use gift funds for a down payment, a buyer usually has to have had that money in his or her possession for a certain period of time.

Investigate down-payment requirements when you are shopping for mortgage programs. This is often a good way to determine which program is best for your specific situation.

Inspection Costs
In most real-estate transactions, the buyer hires a professional home inspector to perform a detailed inspection of the property that he or she wishes to purchase. The buyer is responsible for paying these home-inspection costs.  Spend as much as necessary to obtain a high-quality inspection from a certified inspector.  The up-front investment can help you avoid incurring significant additional expenses in the future.

Your mortgage lender will probably require an appraisal inspection in addition to the home inspection.  The purpose is to evaluate the true worth of the home that you are buying.  A lender will not want to lend you an amount that is significantly greater than the appraised value.  Situations vary, and depending on the home´s location and your lender´s rules, the amount that you can borrow will vary.

Private Mortgage Insurance
Private mortgage insurance is an expense that potential buyers hope to avoid.  It is not required for all mortgage-based home purchases. Whether you will be required to have this insurance depends on your financial situation and your lender´s policies.

Private mortgage insurance (PMI) is a cost associated with taking out a mortgage when the buyer is unable to provide what the lender considers to be a suitable down payment.  Usually the cost of PMI is wrapped into your monthly mortgage payment, but you will probably need to pay an upfront PMI application fee.

New Construction Inspections
This up-front-cost will be part of your costs only if you opt to build a new home.  Most mortgage lenders insist that you independent inspections are conducted throughout the home-building process in order to protect their, and your, interests.

Up-Front Interest
Some lenders require that buyers pay the interest accrued from the closing date to the date of the first mortgage payment on or before the day of closing.  Your lender will be able to provide you with that amount well in advance of the closing.

Credit-Report and Mortgage-Application Fees
Some lenders will waive these fees or wrap them into the amount of the mortgage payment.  A credit-report fee is charged to a mortgage applicant to cover the costs of pulling the potential borrower´s credit report as part of the application process.  This fee should never be significantly higher than the actual cost of the report.  Read your lender´s fee disclosure carefully before selecting a mortgage program. Ask your realtor about ways to decrease the credit-report fee assessed by most lenders.

A mortgage-application fee is basically the cost of doing business for a potential mortgage borrower.  This fee is assessed by the lender in order to cover the clerical and administrative costs associated with processing a mortgage application.  Again, your realtor may be able to assist you in finding ways to reduce these costs.

Transfer Fees
Depending on where you are purchasing a home, you may be required to pay a transfer fee to cover the cost of transferring property records from the seller to you, the new buyer.

Impact Fee (Home Association Fee)
This fee is applicable only if you are purchasing a town home, a condo, or a house that is governed by a homeowners´ association.  Your realtor can help you evaluate the associated fees and determine whether you would be responsible for paying them.  Impact costs are almost always paid on the day of closing, but the actual amount will depend on the specific circumstances.

This list of buyers´ costs is not all-inclusive, but it does include the most common costs that a homebuyer needs to pay before the home transaction is finalized.

Many years of experience have taught realtors to find out whether sellers might be willing to reimburse you for some of your out-of-pocket, up-front expenses. They also know ways to get the costs included in your mortgage amount.

Buying a home requires a tremendous amount of research.  By being prepared to cover the miscellaneous upfront costs of your home purchase, you will save a significant amount of interest in the long run.

^{Contact me today for more information!  Rod Potter/ Email: rpotter@carolina.rr.com / Phone: (704)840-4137}

Incoming search terms for the article:

• home buyers

As a buyer, you have probably heard over and over again how important a home inspection is in the home-buying process.  Home inspectors need to be certified and come with many good recommendations.  The security and health of your family depend on their attention to detail and ability to see things that are not visible to most other people.

When you are preparing to purchase a new home, the information provided in a home-inspection report is critical for protecting your family.  Here are the top ten findings of home inspectors, and what can be done to resolve the issues:

Inadequate Drainage
In most cases, you will realize that a home has inadequate drainage long before you purchase it.  You will probably smell dampness or see visible water damage along the walls of basement or crawlspace.  If a home inspector indicates that a home´s drainage is inadequate, you will probably need to repair or replace downspouts and gutters.  You may also need to install French drains or, in extreme circumstances, you might have to level the entire lot to facilitate proper drainage.

Out-of-Code Electrical System
This is a very common finding in home-inspection reports. The problem with bad wiring is that it presents a risk of fire and other problems, including ruined appliances and electronics. In general, an electrical system will need to be brought up to code before an occupancy permit can be issued for a home.

Leaking and Damaged Roof
A home inspector will check a home´s roof carefully to inspect the materials for aging and possible damage. In general, roofing materials can be replaced in small sections. Unless there is significant damage, a complete new roof will not be required.

Dysfunctional Heating System
A dysfunctional heating system can be a significant danger for the home´s inhabitants.  Most of the time, this sort of finding warrants replacing the heating system.  The good news for home owners is that furnace installations are relatively inexpensive. In addition, modern furnaces are much more efficient than those made in the past. A new heating system will most likely pay for itself in a few years, thanks to its lower utility costs.

Overall Poor Condition
An indication of overall poor condition means that the previous owners did not keep up on home maintenance.  Some of the indicators of poor condition might include haphazard repairs to the electrical system or plumbing, cracked walls, peeling paint, broken light fixtures, or non-working switches and outlets.  There might also be water damage or problems with the home´s foundation.

Structural Damage (Minor)
Most minor structural problems are easy to repair and do not pose a danger to the home´s inhabitants. The leading cause of minor structural damage is water damage.  Water that comes into the home through windows, doors, or cracks in the foundation will cause minor structural problems.

Plumbing Problems
A home´s plumbing should be up to code and composed of new materials wherever possible.  If a home inspector finds rusting pipes, lead-based materials, or broken fixtures, he or she will probably put these items on the home-inspection report.

Drafts
A home inspector will check to see whether the windows and doors of a home let air pass through.  If this is a problem, it can usually be fixed by re-glazing windows and applying silicone caulking around the openings.

Ventilation Problems
If a home seems to have a problem regulating moisture, chances are that the home inspector will indicate that there are ventilation problems.  This situation can be alleviated by installing fans and/or by adding windows that can be opened to bring fresh air into the home.  Attics require adequate ventilation for heat efficiency.

Environmental Hazards
Few home inspectors specialize in environmental hazards. Therefore, it is a good idea to have environmental inspectors assess the home for hidden dangers either before or after the home inspector has finished his or her portion of the inspection. Here is a list of some of the types of environmental hazards that may be present in homes:

• Lead-Based Paint: The presence of lead-based paint is extremely dangerous, yet a typical home inspector may not be able to locate the problem.  A special test must be performed to determine whether lead-based paint is present in a home.  Removing the danger involves a process through which the walls are either sealed or removed and replaced.  Lead poisoning is dangerous and can be fatal to young children.
• Radon Gas: A typical home inspector will probably not be able to detect the presence of this odorless and colorless gas that is known to cause cancer. If radon is discovered in a home, a mitigation pump will need to be installed to remove the gas.  This installation is expensive.
• Drinking Water Issues: A water test can determine the purity of your home´s water supply.  Correcting problems with the drinking water range from simple pipe replacement to the replacement of the entire home plumbing system, depending on the source of the problem.
• Leaking or Damaged Heating Oil Tanks:  A home inspector or heating system inspector should be able to spot a faulty oil storage tank.  Replacement is generally the only acceptable solution, but it is very expensive.

Conclusion
Now that you are familiar with the top ten problems that home inspectors find, you are better prepared to react to the presence of such problems.  You might be comfortable replacing a few missing roof shingles, but if the home has several of the problems described above, talk with the owners to find out how much they are willing to contribute to fix those problems.  They could offer to pay for repairs and updates directly, or they could agree to lower the home´s purchase price.

Ask your realtor for a recommendation for a local home inspector who is properly certified.  A home inspection is important for the health and safety of you and your family, and therefore the inspector should be chosen based upon the knowledgeable recommendations that you receive from others.

Knowing what to expect from a home inspection will make you a better homebuyer and a better homeowner.  Never skip the home inspection, because that would be like buying a vehicle sight-unseen.  You need to keep your family´s best interests in mind.  A home-inspection report that reveals significant problems is usually an acceptable reason for a buyer to back out of a sale.  Therefore, keep that in mind if you are unable or unwilling to do what is necessary to repair the flaws, backing out of the deal is one of your rights as a potential buyer.

Contact me today for more information!  Rod Potter/ Email: rpotter@carolina.rr.com / Phone: (704)840-4137