Unexpected Home Buying Fees to Watch Out For

Experts help take the guessing out of unexpected fees.

Buying a home can feel scary for new homebuyers, but it can become downright frightening when they are buying a home and encounter fees they never expected or planned for. ESTATENVY spoke with top real-estate agents serving the Chicagoland area to share their expertise on unexpected fees and costs new homebuyers should plan for in the home buying process.

Mortgage Points

Typically, new homebuyers will focus their financial attention on three things when buying a house: the cost of the house, the down payment and the interest rate on their mortgage. It’s hard to argue with why that’s the case. However, when talking to mortgage lenders, new homebuyers will encounter the idea of paying “points” that they may not have heard about before.

“Many buyers will pay mortgage ‘points’ in order to lower their interest rate. In some cases, the benefit to the monthly payment is not worth the up-front fee. Buyers should make sure they have a trustworthy lender who will educate them on the pros and cons and make sure paying those points gives them a long-term financial advantage. If it doesn’t, don’t buy the points,” says Hilary Kaden, a real estate broker with @properties.

Uncommon Closing Costs

What can be glossed over when buyers enter the market for a home are closing costs, which cover a wide-range of fees and costs that need to be paid to complete the transaction of the home from the seller to the buyer. Many are state, county and municipality specific.

“Closing costs are almost always higher than homebuyers are aware of. They can range anywhere from 1.5% to 4% of the purchase price of the home,” says Kaden.

One of the closing costs that some haven’t heard of prior to closing on a home is a real estate transfer tax.

“Real estate transfer taxes are taxes imposed by states, counties and municipalities on the transfer of the title of real property within the jurisdiction,” notes the National Conference of State Legislatures website.

Kaden notes that not all states have them, but most do. Additionally, each jurisdiction divides the responsibility of the transfer taxes differently between buyers and sellers. Make sure to check your state, county and municipality for the latest information on transfer taxes you may encounter as a buyer.

Surprise Fees

Rick Szekely, a real estate agent with Redfin, says that he’s encountered questionable fees from title companies homebuyers should watch out for.

“Charging an email fee or a courier fee is not uncommon, but attorneys are not successful in most cases in getting them removed.”

It’s best to discuss these types of fees with your attorney and determine if anything can be negotiated out or down.

There Are No Dumb Questions

Homebuyers shouldn’t be afraid to ask questions throughout the home buying process about things they are unsure of. It could save them a lot of money when it’s all said and done. Kaden recommends that buyers should always get a loan pre-approval before starting the search for a home.

When buyers ask questions they know exactly what they can afford and their lender can educate them on all of the fees associated with the loan as well as what their monthly payments will be based on their down payment. In addition, an attorney can provide an estimate of their complete closing cost based on a particular purchase price. Both of these pieces will give buyers a very good sense of the costs to purchase a home.”