Loan Origination Fee
A lender’s fee for establishing a new loan. Government regulations allow only 1% origination fee on FHA or VA loans. Conventional loan fees can vary from -1 to 3+ points, plus other costs. A point is 1% of the loan.
Appraisal Fee
Fee paid to obtain an estimate of market value upon which the lender will base the loan amount. The cost is about $300-$500. Non refundable.
Credit Report
An evaluation of the buyer’s credit habits made by a credit bureau for the lender. The cost is $50-$60. Non refundable.
Tax Service Fee
A charge of approximately $75 is made by a tax service company to verify to the lender that the taxes have actually been paid when due or are due to be paid by borrower or mortgage company if impounding.
Assumption Fee
Fee of approximately $250 up to 1% of the loan balance is charged by the existing lender for the privilege of assuming the existing loan.
Pest Inspection Fee
Fees of $75 – $175 is charged by termite companies for inspecting property for damage done by wood destroying organisms and dry rot. It is customary for the seller to pay for Section 1 and the buyer for Section 2 work.
Other Inspection Fees
Other inspections the buyer may choose to have done are: property inspections that usually cover foundation, electrical, plumbing and overall construction at a cost of $300-$400. Roof inspections cost $75-$125. Geological reports cover subject’s site in relation to fault and slide zones, costing about $100. Septic $200-$400. Radon $50-$100. Asbestos $75-$125.
Title Insurance
This is an extended policy with more specific coverage than the standard policy. It covers unrecorded liens, is based on loan amount only and is required by almost all lenders. The cost is obtained from a rate chart and is based on the loan amount.
Miscellaneous Costs & Fees
An estimate of $150 should be adequate to cover minor items as notary, recording documents, endorsements, etc. as well as allowing for variations from these other estimates.
Hazard Insurance Reserve
Two month’s premium is collected for the impound account if required. The buyer will need to either provide or pay for coverage for the 1st year.
Prepaid Interest
Interest must be paid from COE (close of escrow) to 30 days prior to the first regular mortgage payment. An estimate of one months interest should suffice.
Mortgage Insurance
Mortgage Insurance is required on all conventional loans greater than 80%. The cost may range from 1/2% to 1% per year and 14 months premium is collected in advance. This is coverage for the lender in case of default.
Tax Impounds
If the new loan is going to have an impound account, the lender will require from 2-10 months taxes to be deposited, depending on the time of year. Note: if taxes are prorated, buyer’s total charge for taxes should equal about six month’s taxes.
Escrow Fee
These fees range from $750-$2500, depending on the sales price. In some counties its customarily paid by the seller, in other counties the buyer pays, while in others it may be customarily split. Remember though, everything is negotiable.
Negotiating Fees
The above fees are typical costs when buying real estate in Florida counties. Most of the fees are considered buyer’s non-recurring closing costs. Some of the fees are fixed while others are negotiable. Your real estate agent can negotiate with the sellers to pay some or most of these costs, saving you thousands of dollars in closing costs. Ask your real estate agent and loan agent to provide estimated closing costs of buying a home before looking at homes.
Most lenders are required by federal and state laws and current banking regulations to obtain an appraisal for most loans secured by real estate. As of Jan. 1, 1993, all appraisals made for mortgage loans from federally insured lenders and other federally related transactions must be made by a licensed or certified appraiser.
What is a Appraisal?
An appraisal is an objective supported opinion of value of an adequately described piece of property made by an appraiser who has sufficient knowledge, training and experience to accurately estimate its value. In this detailed and time consuming report, appraisers use comparable sales together with information about the property being appraised, its neighborhood and community along with the local and national economy, to support the appraised value.
Look Objectively not Subjectively
The most important thing you can do when previewing is to look at the house as if empty: four walls, floors and a roof.
Don’t let the current owners’ furniture and decor influence you.
Important Tip!
If you are buying a house with the owner carrying the paper (loan), it is well worth the cost to hire an appraiser to make sure you don’t pay more than it is worth. For your protection many real estate agents will write in a purchase contract: this contract is contingent upon the property appraising for the sales price.
How is Value Established?
The value of a house is based upon recent sales of the similar neighboring homes in the market as well as rentals and listing data. Ideally, appraisers want to use sales of properties of the same size, age, room count, condition and with similar amenities and external influences. This rarely happens though, so adjustments have to be made, based on what people will pay extra for.
Examples: extra square footage, bedrooms, fireplace, upgrading, parking facilities, swimming pool, lot size, location and so on. To help get a better picture, this information is entered on a form, a value for differences is established and comparisons are made to the subject property. A minimum of three verified closed sales with photos are required to establish a value.
Houses Appraise for More When:
Remember: Location, location, location.
You can change everything about a house except it’s location.
What is Poor Location?
Think about Selling – When You are Buying
Location is a big factor in a home’s appraised value. This is most notably felt at the time you sell or refinance. What seems like a bargain when you buy might turn into a real headache when you try to sell. Drive around the neighborhood and note any adverse conditions. You may think you can live with something adverse for the price, but when it’s time to sell you might find buyers won’t.
Important Tip!
Adding onto your house = Always obtain a building permit. A 600 square foot addition built without a permit is given no value on an appraisal. When it is time to sell or refinance, the frustrations of the building permit process will be worth it. Always save copies of the final permit sign offs and keep with your house papers.
Buying a House with an Addition?
Verify that it was built with a permit prior to closing the sale. Don’t just accept the sellers word. Get copies of the permits before final sign off. Should you want to refinance or sell at a later date, and the appraiser cannot verify the addition being permitted, no value should be given. The result: no new loan or worse . . . no sale.
Tip: A one bedroom house or condominium doesn’t appreciate as well and is harder to sell.
Work with An Agent
An advantage of working with a real estate agent is that they can provide you with sales information of similar properties to better guide you on how much to offer. Your agent can provide recent sales “comps” for similar homes in the neighborhood. Finding the list prices is also important. Comparing the list prices with the sale prices tells you exactly what percentage of the list price sellers are getting.