Written by Felicia Brewster-Bradshaw, REALTOR®
Purchasing a home is an exciting new chapter! While buyers often focus on saving for a down payment, several other costs and considerations arise during the process. Understanding these costs will avoid unpleasant surprises at the settlement table.
Brokerage Fees.
As you begin your search with a REALTOR®, discussing the compensation that their brokerage may charge is important. In Maryland, your brokerage agreement will clearly outline the compensation owed to your broker. This can take the form of a percentage of the purchase price, a flat fee, a retainer, an hourly rate, or any combination of these. Have a conversation with your brokerage about what they will charge for their services, whether you will seek to have the seller pay some or all of those costs, and what you might be responsible for paying.
Lender Fees.
If you’re financing your home with a loan, ask your lender about their costs to provide you with that loan. These can include origination fees, credit report costs, and points for buying down your interest rate. Lenders can provide an estimated closing sheet detailing these fees, which can vary based on the lender, loan type, and credit score.
Inspections and Repairs.
As part of your offer on a home, you may have included several contract contingencies. A common one is the home inspection. Additional inspections for radon, termites, well, septic, and other specialties might also be necessary. Inspection costs vary based on the type of inspection and the home’s size, and they may reveal issues with the home condition that will require replacement or repair before moving to closing. While these are additional costs, they can provide you with peace of mind that your home is in sound condition.
Settlement Fees.
As you approach closing, expect fees from the title company, including title search fees, closing fees, and potentially a property survey. If you’re obtaining a loan, there will be a lender title policy, and you may also opt for a title policy on the home. These services can protect you from unexpected liens or claims against the property and ensures that any issues are resolved before you purchase it.
Transaction Taxes.
State and local governments charge fees when homes are bought and sold, such as transfer taxes, recording fees, state deed costs, and deed recordation costs, which are included in your closing costs. Additional costs should also be considered, including prorated property taxes, HOA or condo dues, move-in fees, and notary fees.
Post-Closing.
Even after the purchase is complete, it’s wise to set aside funds for moving expenses, home updates, and repairs based on your inspection report.
Of course, not all these costs may come out of your pocket. Inquire with your REALTOR® and mortgage lender about potential financial assistance programs, such as local, county, or state grants, or requesting closing cost contributions from the seller.
By understanding and planning for these additional costs, you can navigate the home-buying process more smoothly and confidently, ensuring a successful and satisfying purchase. Happy house hunting!
