Finding the perfect South Maryland home and being approved for financing is just the beginning of your financial responsibilities in purchasing a home. In addition to the cost of your mortgage, there are “closing costs”. Are you wondering what exactly makes up closing costs? Here’s a list of costs you need to prepare yourself for when you buy a home:
Downpayment – Experts recommend that all homebuyers provide at least 20% of the total purchase price of a home for a downpayment. This dollar amount will vary from home to home. For example, if you are considering purchasing a $300,000 Southern Maryland home, you should provide a downpayment of $60,000.
Home Inspection - Even if you buy a newly constructed South Maryland property, you should get a home inspection done. Talk to your REALTOR® to make sure your offer includes a clause that will allow you back out of the deal if the home inspection indicates any major potential and costly problems. New construction doesn’t mean that you won’t run into problems with termites, mold or other expensive issues.
Origination Fees and Points – An origination fee is the amount you pay for the lender to write up and process all the loan paperwork. Points are an upfront amount you pay to lower your interest rate. For each “point” you pay, your interest rate is lowered 1/8%. This can add up to thousands of dollars in savings over the life of the home loan.
Appraisal – Lenders require that an appraisal be done before a loan will be approved to make sure that the house they are lending you the money for is worth what you are borrowing. If a home is only worth $250,000 and the asking price is $300,000, the mortgage company will only allow you to borrow up to $250,000. You will be responsible for coming up with the other $50,000 if you really want the home. This is in addition to the downpayment on the home loan as well as the other closing costs. Another benefit of the appraisal is for you to know the real market value of the Southern Maryland home you are interested in.
Private Mortgage Insurance (PMI) – When a borrower puts less than 20% of the purchase price down, the mortgage company will require them to purchase PMI. This is insurance to cover the lender in case the buyer defaults on their loan. In today’s economy, this is something that is particularly at the forefront of lenders’ minds. If you put at least 20% down on the loan, you won’t have to pay PMI.
As you can see, the purchase price of a Southern Maryland home is only one part of the financial puzzle when it comes to buying a house. It’s important for you to weigh the closing costs involved when deciding if you can afford to buy a home. Please contact me if you have any questions or need help with any of your Southern Maryland real estate needs
Bonnie Augostino, your Southern Maryland real estate specialist
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