The Cost of Buying a Home

Home buying costs typically encompass various financial obligations a buyer must consider when purchasing a property. These costs fall into three main categories:

  • Down Payments: This is the initial payment a buyer makes towards the purchase of the home. It's usually a percentage of the home's total purchase price. The down payment size can vary significantly, often ranging from 3% to 20% of the home purchase price, depending on the type of mortgage and the lender's requirements. A larger down payment can result in a lower mortgage rate and reduced monthly payments.
  • Origination Fees: Lenders charge origination fees to process new loan applications, covering administrative expenses like credit checks, underwriting, and preparing the mortgage application. These fees may be a flat rate or, more commonly, a percentage of the loan amount, usually between 0.5% and 1%.
  • Settlement Services: This category covers a range of services necessary to complete a home purchase, including title searches, title insurance, surveys, home inspections, and legal fees. Settlement services also encompass the costs associated with closing the transaction, often called "closing costs." These costs include appraisal fees, attorney fees, prepaid interest, and property taxes. The total for settlement services can vary widely based on the property location, the complexity of the transaction, and local market practices.

Understanding these costs is crucial for potential homebuyers, as they represent a significant portion of the overall expense of purchasing a home and the listed property price. Buyers need to budget for these expenses when planning their home purchase.

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Purchase Information
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Home purchase price is the price you pay for your home.
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Down payment percent is the percentage of your home purchase price that is paid upfront to the lender.
Origination Fees
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Origination charges are the fees related to taking out your loan, to compensate your lender for providing origination services.
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Discount points are a percentage of the loan amount that is charged to the borrower in order to gain a lower interest rate.
Other Settlement Services
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Home appraisal are the costs involved in hiring an impartial expert to evaluate the property's value.
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Credit report fees are paid to a credit reporting agency or broker to gain an official credit report. Your credit report will contain your credit score and history, which will impact what interest rates the lender will offer you.
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Flood certification fees are paid to a third party to assess and document the flood zone status of your property.
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Tax service fees are paid to obtain a report on any unpaid tax bills you may have.
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Title service fees are incurred to process the documents that prove the transfer of the home ownership rights from the buyer to the seller.
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Title insurance fees are paid to an broker to cover unexpected disputes surrounding the ownership rights of the property.
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Recording fees are paid to the local government to record the sale of the property.
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Transfer tax are taxes paid to a local government when a property changes hands.
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Survey are fees paid to a surveyor to identify the boundaries of the property.
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Pest inspection fees are paid to a third party to check the home for pests or termites.

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Estimated Home Closing Costs

Estimated Home Closing Costs
Cost Amount
Origination Charges
Settlement Services
Total Closing Costs

When preparing to buy a home, aim to save an additional 2% to 5% of the purchase price for closing costs. These costs cover essential steps in finalizing your home purchase, such as loan processing, appraisals, title insurance, and legal fees. For example, if you're buying a home for $300,000, set aside $6,000 to $15,000 for these expenses. Planning for these costs upfront will help ensure a smooth home buying process and prevent surprises during closing.