Understanding the Fees Associated with Buying a Home

February 11, 2022/in Loans & Mortgage /by Cara Chatellier

When it comes to buying a home, whether your first or tenth, understanding exactly what goes into buying it, especially when it comes to money, is crucial. Outside of the direct cost of a home, there are various fees associated with purchasing a home. Those fees can sometimes vary based on the offer presented to the seller, the current market conditions, and the type of home loan you decided to go with (and qualify for!).

Although it would be magical if all we had to worry about was the listing price, that’s just not the reality of the housing world. The good news is that my team and I believe in the power of transparency and getting you as ready as possible for the new big adventure in your life: a home purchase.

After you land on a favorable mortgage offer and solid preapproval, it’s important to remember that, although exciting, having a comfortable amount of money saved ahead of time will help you tackle all the fees associated with buying a home without the added worrying of scrambling to get your ducks in a row as you’re on the hunt for your dream home.

Let’s break down the costs associated with buying a home so that when you’re ready to step into the world of homeownership, you are ready and able to afford the home you adore.

1. Down Payment

A down payment is the amount of money you put down, upfront, on your total home purchase. It is deducted from the total purchase price at the time of sale and not part of your standard mortgage payment. Most home loans require a down payment of some kind. If you are opting for a conventional or FHA loan, a down payment is required. FHA loans require a down payment of at least 3.5%, while conventional loans vary based on property type, location, and loan terms. Conventional loan down payment amount is typically anywhere from 3% to 20%.

The only loans that do not require a down payment are VA loans (available only to military members) and USDA loans (used to purchase homes in rural areas as designated by the USDA).

It is a good rule of thumb to have about 10% of the total home cost saved for a down payment. If you spend less, great, as that can be used to cover other fees.

2. Closing Costs

Before you can get keys in hand for your new home, closing cost payout is required. “Closing costs” is an umbrella term used to describe all the fees associated with pulling a mortgage. Typically, they range from 2% to 5% of your loan’s principal.

Although different for every situation, they often include:

Credit check fee
Application cost
Appraisal
Home inspection
Underwriting fees
Title search
Title insurance
Transfer tax

In some cases, the sellers will cover closing costs (in partial or full) based on the terms of the final offer. Therefore, it is important to speak with your loan officer to determine exactly what fees you’ll need to pay out under your specific closing costs.

3. Homeowners Insurance

This type of insurance helps to protect you financially from unexpected events that could significantly damage your home. Think natural disaster, theft, or in-home accidents, like fire.

Homeowners’ insurance isn’t required by law, but most mortgage lenders require it. The cost varies by loan details and location and the options seem quite endless for coverage. We always encourage you to compare different options and rates to choose one that best suits your needs and budget.

4. HOA fees

If you’ve purchased a home within a designated community, there may be HOA or homeowner’s association fees you have to pay on a monthly, quarterly, or yearly basis. Although different for everyone, the specifics of your HOA requirements will be outlined in your homeowner’s purchasing agreement. Fees are extremely variable and are set into place by the homeowner’s association of your community.

Your dues cover specific services that the association provides, which may include security, a pool, a gym, or landscaping and maintenance.

5. Property Taxes

Like any big purchase, tax is something that comes with the territory. In most cases, property tax is included in your monthly mortgage payment but is separate from the interest and principal portions. Property taxes are paid for the entirety of homeownership and are based on the assessed value of your property.

There are various fees outside of the standard purchase price when purchasing a home to keep in mind. Although these are the most common and general fees, other fees could include home upkeep, renovations, or other non-standard items or requirements based on your unique home, location, or needs.

If you’re in search of your dream home and hoping to secure the funds needed to purchase, we’d love to help you through the process. Contact us today to start your journey to homeownership in New England.

FAQ’s Answered for First Time Homebuyers

November 5, 2020/in Housing /by Cara Chatellier

When it comes to taking the leap and buying your first home, the process can feel nothing short of overwhelming. With a wish-list in one hand and a budget in the other, there are hundreds of questions flying through your mind day and night. The process can be a wonderful experience if you are working with a realtor who understands your goals and communicates in an effective and timely manner. The process can also work wonderfully when you know what to expect throughout the homebuying experience. Getting (and staying) informed will alleviate extra stress and confusion. We wanted to make things as smooth as possible for you, so, here are the answers to some of the most frequently asked first time home buying questions.

Who qualifies as a first-time buyer?

If you’ve never purchased a home before, you’re automatically placed in the first-time home buyer category. Those who have purchased a home in the past can be considered as a first-time buyer again after 3 years from their previous homeownership.

What questions should I consider before making the big purchase?

There are various questions that you should reflect upon before deciding if it is the right time for you to begin the first-time home buying process. Consider asking yourself these before moving forward with pre-approval and home search.

Does my current income allow me to purchase the home size that I need?
Do I have money saved for a down payment?
What does my credit score look like in detail?
Will I need a co-borrower?
What are my plans over the next 3-5 years?

How much will my down payment be?

In most instances you will need to put money down when purchasing your home, but the amount differs based on mortgage loan type. On average, Americans put about 6% down when purchasing. This can easily be calculated by determining what the percentage equals in dollar value based on the total sale cost of the home. For example, 6% of a $250,000 home loan would equate to a down payment of $15,000. Oftentimes, though, home loans for new buyers range from 0% down (VA and USDA) to 3.5% (FHA). To learn what loans you qualify for, contact a mortgage specialist to walk you through the approval process. Once approved, you begin the new home hunt.

What credit score qualifies me for home purchase?

Credit can play a huge role in your buying power. As with most purchases, the higher your score is the better the rate you receive will be. Credit score is considered when looking at general loan approval odds, amount of loan approval and interest rate percentage. For a conventional home loan your score should be about 620 or above. In some instances, FHA approves those with scores of 580+.

Once I have a mortgage pre-approval how do I begin my home search?

The mortgage pre-approval is the first big green light on your home buying journey. At this point you know the range you can spend on your new home. Next, you can begin searching for available homes in your desired area. Working alongside a trusted realtor, you can take virtual or in-person home tours of houses that spark your interest. Once you decide on a home that fits the bill for you, you can move forward with submitting an offer for purchase.

What is “closing” and how long does it take?

Closing is the final step in your home buying process. During the time of home purchase contract completion, between you and the homeowner, a date for closing is decided upon between both parties. In general, closing can take anywhere between 30 to 45 days. The closing date marks the day that the home officially belongs to you and you can begin moving in.

We understand that the road to homeownership may feel tremendous in feat. It is a new chapter that you are beginning for yourself and your family. We can assure you that once you move through the process, it is quite incredible to experience. Work with a realtor that can walk you through all stages of the process while easing stress and anxieties that may pop up along the way. To learn more about the value of first time homeownership, or to get started on your home buying process contact us today.

Make a List of Wants Maura Allard Realtor

Scoring Your Dream Home: Creating a “Wants” List in Your Budget

June 23, 2020/in Resources /by Cara Chatellier

The end goal of every home purchase is to score the house of your dreams, right? Because purchasing a home will typically be the largest purchase of your life, it is a huge decision to finally utter the words, “that’s the one!” and sign your name on the dotted line. It is important to know what your wants and needs are when it comes to purchasing your next home. Prior to beginning your search, and post-pre-approval, you should come up with a list of dream items that fit into your ideal home criteria. This list helps your realtor focus on the homes that satisfy the wants you have in mind, while also sticking within your set budget.

Work Backwards

Imagine the home of your dreams if you didn’t have to worry about a budget. What would that home look like? What would it include? Where would it be located? Ask yourself these questions as you think about your desires in a home. It is important to start at the top of your wants ideal then work backward to really zoom in on what works in your current budget and lifestyle.

Don’t get discouraged if you can’t check off all of the boxes now, you can always save this dream idea and get back to it at a later date to renovate or upgrade your home purchase. As you are envisioning your dream home you will realize that there are things you refuse to sacrifice while also discovering things you are willing to let go of.

Wants vs. Needs

You want it, but do you need it? I am sure you’ve heard this question being asked at one point or another when it comes to any type of purchase, large or small. There is a difference between what you want and what you actually need. When creating a checklist of your criteria split the page down the center and write out what you need, which can include the number of bedrooms and bathrooms, square footage, and location, as well as a list of your wants, like an inground pool or restaurant-style kitchen. Once your list is completed, on both sides, ask yourself how much house you can really afford. You may have to forgo a specific area or an additional bedroom if you don’t need them right now to stick to your budget. Understanding your true needs is key to scoring the home that works best for you and your family.

Also, think about your location. If you’re dead set on the north shore, are you flexible on the town or city? Or do you need to be in Beverly?

What’s Valuable?

When working through your wants versus needs list pay closer attention to things that add value to your home purchase. These items will help you when you sell your home in the future. Such value items can include, hardwood floors, granite countertops, and highly rated school districts. Let go of things that may be valuable to you, but not to the resell of your home. Worry less about minor interior décor and more about what can be done with the home once you move in. Your home value is important, especially if you plan to expand your family or move to a different location in the future.

There are many factors that can affect the decision you make to purchase a home. Understanding your wants and needs when deciding between home options and scoring your dream home is imperative to a successful homebuying journey. You can find a home that fills your heart with joy within your budget as long as you plan out exactly what you want and need. I am here to help you work through your home purchasing list to find a home that fits within your budget and fulfills your needs.

Contact me today, and together, let’s find your perfect home.