Closing and Continuing Costs
Buying a home can be an exciting endeavor in your life — but it doesn't come without major costs. First-time homebuyers may already be aware of costs such as the down payment of the home, or the mortgage loan in relation to the purchase price of the home.
However, it's important to be aware that there are additional costs, such as closing and continuing or ongoing costs, that add to the total cost of your new home. These costs may include processing fees associated with services such as running your credit score or paying for a pest inspection. Borrowers will need to add these costs to their monthly mortgage payment, property tax payment, homeowners insurance payments, and interest charges.
This article provides a brief overview of closing and continuing costs that prospective homeowners should be aware of before committing to their home purchase.
What are closing costs?
Closing costs are fees and processing charges paid to providers when securing your home loan. When you take out a home equity line of credit, you pay upfront for many of the same expenses as when you financed your original mortgage.
Closing costs include items such as:
- Loan application fees
- Credit report fees
- Title searches
- Home appraisal fees (which could include pest inspections or other home inspection fees to determine your home's value)
- Attorney's fees
- Recording fees
- Transfer taxes
- Underwriting fees
- Origination fees (a percentage of the loan amount you borrow; also called “points")
These expenses can add substantially to your loan estimate, especially if you ultimately borrow little from your credit line. You may want to negotiate with mortgage lenders to see if they will pay for some of these expenses.
What are continuing costs?
In addition to upfront closing costs, some mortgage lenders require you to pay continuing or ongoing costs throughout the life of the loan. These may include an annual membership or participation fee, which is due whether or not you use the account, and/or a transaction fee, which is charged each time you borrow money.
However, it is important to note that some ongoing costs, such as your yearly payment due to the homeowners association (HOA), are not paid to your mortgage lender and are therefore not included in your monthly mortgage payment. Even though such payments may affect your loan amount, they are paid directly to the HOA instead of your mortgage lender.
Ongoing costs add to the overall cost of the loan and, over time, they can really add up. It is important to be aware of all possible continuing costs to add to the total cost of your home.
Related Real Estate Resources
- What is a Mortgage Lien?
- Mortgage and Loan Basics
- Interest Rates, Mortgage Points, and Fees
- Types of Lenders
- Home Equity Do's and Don'ts
Talk to a Real Estate Attorney Today
If you are considering homeownership, you will want to speak with someone who can help you prepare for the total cost of your new home. Real estate attorneys can help you navigate the home-buying process and provide helpful legal advice regarding your closing and continuing costs.
Contact an experienced real estate attorney in your state today.
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