When you buy a home, you make a major investment. Along with the costs for the property itself, you also pay closing costs once the deal is finalized. For homebuyers, these costs cover various fees for services necessary to purchase a home (sellers pay closing costs too, but their fees relate to aspects like title transfer and commission). Because budgeting is such an important part of the process, here are some items you must cover. 

Mortgage Application Processing

It costs money to perform background and credit checks when processing your mortgage application. Buyers must also pay an origination fee, which covers the creation of the paperwork involved. Processing fees vary according to the lender, but they’re usually around $500 or less. Origination fees are 1% of the total sale price of the home. 

Home Inspection

You usually can’t buy a home without an inspection. Not all damage and defects will be obvious, and once you make a purchase, you’re stuck with any repair costs.

Homebuyers usually schedule inspections after making an offer but well before closing, which leaves time for any repairs. The larger the home, the more expensive the inspection.

Insurance 

Home insurance is essential, as it protects primary and freestanding structures and personal belongings and provides liability coverage. All buyers are required to pay home insurance premiums for the first year in advance.

If your down payment is less than 20% of the purchase price of the home, you’ll also have to pay for private mortgage insurance. Insurance costs are based on many factors, such as the deductible you choose and the age of the home.

For private mortgage insurance, costs depend on your credit score, the terms of your loan, and the amount of your down payment. 

Prepaid Interest

Prepaid interest covers the period after closing but before you’re due to make your first mortgage payment. This amount is calculated using your mortgage rate, the balance of your loan, and how many days are in the period.

The more days there are between closing and the first payment, the more interest you’ll pay. Scheduling closing at the end of the month shortens the amount of time between these two dates, which saves you money. 

When you want to buy a home, having the right support is crucial. Homebuyers in and around Red Wing, MN, trust in the service provided by Lawrence Realty thanks to more than 72 years of experience. They’ll guide you through each step of the process, from choosing the right home to helping you find a lender. And because they’re a family-owned and -operated business, they pride themselves on offering top customer service. If you have questions, feel free to call (651) 388-4745 today. You can also visit the website for more great home buying tips.