Beware of Hidden Costs

When people go to buy a home for the first time, they think of the mortgage as a loan which covers the price of the home they are buying, and that's it. While most of the mortgage will cover the cost of the home, though, many people count on a little bit extra in order to pay for some of the hidden costs incurred when they purchase a home.

What this means for the buyer is that when applying for a loan, you need to make sure the amount covers not just the cost of the home itself, but the hidden costs as well. We list the most common additional expenses below, along with some ball park figures on their prices.

Property Taxes: These won't come out right away, but you will have to pay them within the year. You can save up for them, or have them built into your mortgage agreement. Inspection: Everyone should have a house inspection done before they buy a home. You get peace of mind, but keep in mind that this is still an expense. They typically cost between $200 and $400. Appraisal: Want to be sure the home is worth what you're paying? This is how. It's another $400. Repairs: Lots of people like the idea of buying a house that needs a bit of work, because it provides a bargaining chip. But, you still need to pay for those repairs. Many lenders will front you money to improve your home, and lump it in with the mortgage.

Closing Costs

We're going to list closing costs in a separate section, because many of the fees we listed above can be covered by the buyer with cash in hand, should they choose. Closing costs are almost always built into the sale somehow, either covered by the seller or lumped into the mortgage taken out by the buyer.

Loan origination fee: Usually 1% of the loan amount; you pay it to the lender in return for giving you a loan. Tax Service: You also get to thank people for making you pay taxes with a $70 gift. Underwriting Fee: Another thank you for your services fee, this one to the company who underwrites the mortgage itself. About $300. Title Charges: These can vary significantly, depending on the property changing hands. Closing fees are around $100, while the policy can run from $50-$800. Insurance: In order for those underwriters to agree to the financing, you'll have to have house insurance. Usually around $1000 a year, but it depends again on the size of the house and your assets, and your policy.

Adding up those costs, you can see why many people need them covered as a part of the loan. It's a lot to pony up at one shot!