Veterans get a special deal (well deserved) where the government helps insure the house so that they can purchase the property with no money down.  This is great, but make sure you can afford the payments.     There are also some other ways to get a loan without much money down, FHA especially for first time home buyers, see your agent or lender for more help. 

OTHER COSTS TO CONSIDER

Taxes:     Can’t be avoided (to my knowledge).    At closing one of two things will happen with the property taxes.   If the seller has already paid them for the year you will have to pay him for the number of days left in the tax year but then won’t owe more property taxes until next year.    If he didn’t pay them in advance, he will have to pay you for the number of days that have already passed in the year.   In this case you will use that money to pay for his part of the year and also have to pay for the rest of the year.   This can get confusing and lead to big arguments at closing.   Make sure your agent gets this information to you ahead of time.  The bottom line is you only pay for the number of days you are in the property (in theory).  Taxes can be found for Fayette County in the PVA web site ( www.pvdnetwork.com ).  

Property Taxes in Fayette and Jessamine Counties per $100 assessment

Real Estate Taxes :     Tax records for houses in Fayette County can be looked up on the PVA website.    Your real estate agent also has access to tax records in all the surrounding areas.  Transfer taxes  for the county to transfer the deed.

Utility Costs:     If you are renting and the utilities are part of your rent, get ready for a surprise.   Where you live and how you live are two of the major factors in determining utility costs.   A large house is more expensive than a small one to heat.   A large family does more cooking at home and hopefully more laundry and bathing, this costs more.  Even the utility companies charge different amounts and this can be a large factor.  When looking at a house ask for utility costs.

  Homeowners’ Insurance:       The lender will want proof that you have this.  Obviously the more expensive the house the more expensive the homeowners’ insurance.   When you go to closing make sure that your insurer has sent notification that you have insurance.  The lender will not allow you to be without it.  Two major types of policies include: Replacement cost policies which are usually best (and more costly) for older homes and cash-value policies which are more beneficial for newer houses.   Your Insurance agent will help you decide what is best for you and the lender will decide what is best for them.

 1% approximate yearly cost of house for maintenance – For a $150,000 dollar house this would be approximately $1500.00 a year, or $125.00 a month.  If the house you buy is in poor condition this can cost much more.   Please check on the Home Inspection pages for the life expectancies for various house parts.  (Examples:    Hot Water Heater, Roof, etc).

 Furniture, landscaping, things you would like to have.   These need to be put into your family budget.

The cost of the Mortgage go to the amortization page.  (Click Here)  

CLOSING COSTS –

Typically from 3% to 6% of the loan amount, depending upon your credit, down payment, cost of house, etc.    That means on a $100,000 dollar house these fees can run from $3000 to $6000.   Most of the time they can be built into the loan so it doesn’t come out of your pocket on closing day, but remember they are expenses.  

Closing Costs may include the following and some include other items:  (Remember the better your credit and the more you put down the better your negotiating position with the lenders.)  

 Origination Fees charged by your lender:    These fees are one of the ways the lenders make their money.  There really are expenses in preparing the loan.  You do need to watch for fees that are just added on to get more money.    (Credit report; Underwriting Verification – ( The lender will have people check the information you gave them); Loan processing Fee will be included.  Origination Fees are usually between 1% and 2% of the loan amount.

 Appraisal Fees:    You probably think the appraiser works for you.  Even though you pay him/her, he/she works for the lender.    Sometimes it is difficult to even get to see the actual appraisal.   The appraiser does an inspection of the house and finds other houses similar to it and compares the price of those “sold” houses to what yours should cost.    The lender will not lend you more money than what the house is worth.   An unfavorable appraisal could change your loan costs.  This will run around $300.00 dollars depending upon various factors.    When getting the make sure you negotiate with your lender for you to get a copy of the appraisal.   Some buyers make a contingency that the house must appraise for what they are paying.  Contingencies can be good but don’t over do them for they could make a seller less interested in accepting your offer.

Government Transfer Taxes:     For both the state and the local government.   

  Private Mortgage Insurance (PMI) :            If you don’t put 20% down, your credit history is poor, or you are a first time buyer, this may be added to your expenses.    If you put less that 20% down you will probably pay PMI.     Many lending institutions won’t tell you that and you continue making payments that are unnecessary.  On one estimate that I was involve with for a $99,000.00 dollar loan,  the cost per month would have been $74.25 per month.   People will get different rates based upon their situation.  One example I read of said that for a 90% loan for a house costing $160,000,  the insurer charged per year .005 percent.   The loan was for $144,000 ($160,000 - the $16,000 down) times .005 = or $720 per year = $60.00 per month.  (Many people do not realize that after you get a certain amount of equity in your house (usually 20%) you can usually have the insurance dropped.

    The actual formula is as follows:

        100% loan  the PMI rate is 0.0109     (Example:  $100,000 loan (times) .0109 = $1090 per year/12 = $90.83 per month

        97% loan the PMI rate is .0097

        95% loan the PMI rate is .0076

        90% loan the PMI rate is .005

        85% loan the PMI rate is.0029

  Title Search:      The lender wants to make sure that the property you are buying has a good deed.   If it isn’t not only can you lose your house but they can be out a lot of money.  They are going to probably pay a title company to have their title lawyer or designee do a search of the title to make sure that the deed has no problems (liens, question of ownership, etc.)  This might cost you $400.00 to $600.00 depending upon circumstances.

Title Insurance:       What if they did a title search and the title company missed a lien on the property, or missed finding out  that the property actually belongs to a missing relative.  If this would happen the lender (and you) would be out of luck.  That is why the lender requires title insurance.  If something goes wrong the insurance will pay damages.   This insurance can cost (depending upon factors), around $300 to $600.00 (it is a one time payment).   This insurance protects the lender not the buyer, and I advise in most cases for you to arrange for title insurance that will also protect you.   Piggy backing upon the lenders insurance can save you money.   Unfortunately, you will be paying for both the lenders and your own insurance.  The owners title insurance when purchased at the same time as the lenders insurance is usually about 2/3rds of the cost.

  Home Inspection:       Yes, I know you used the inspection forms found on another page of this site, but you really want to have a professional inspect the house.  In fact it is doubtful if you can get a loan if you don’t have someone inspect it.  Many buyers (anyone I would represent as a buyers agent) have a contingency that the house will be purchased contingent upon a satisfactory inspection.  I was in a contract class where a lawyer told the story of a contingency saying “upon the inspection of the mother-in-law).  She inspected the house didn’t like it but the people had to buy it anyway because it didn’t say “satisfactory”.    Home inspections will be covered in greater detail on another page.   Cost usually is approximately $200 to $400 and is paid by you before closing.

  Survey:            May be required by lender to make sure everything is correct.   This may be something you want even if the lender doesn’t.   If part of your new garage is on the next door neighbor’s property – goodbye garage.   You also want to know about any problems beforehand so the seller can correct them.  Approximate cost $250 - $400 paid before closing.

  Flood Insurance :  If you are in a flood plain – the bank and your agent should both check this.

 Points: Points are extra fees added by the lender to do one of two things.

1.                  Discount Points – is money paid to the lender at the time of closing that will lower your interest rates.   This may be good for you or it may not.   The longer you are going to stay in a house the more likely you can come out ahead.  You and lender should sit down and figure out what your payments would be at the interest rate you would get with the points and the rate without the points.  Do the math and see how long it would take to break even.  These are tax deductible.  One point equals about .25% off of your rate.

2.                  Origination Points: These are fees the lender will charge to make extra money.  That is pretty much what they do.   If your credit isn’t great or you don’t have much down you may not be in a good negotiating position to eliminate these.  They may be taking a chance on you and feel that they should make the extra money for their risk.  Make sure you ask the lender about these fees when you are negotiating the loan.   These are not tax deductible.

All lending institutions are not the same.   When you apply for a loan you should ask for a best faith estimate for the loan.  They (by law) will provide it to you.

 The following figures are for a possible closing on a $99,000.00 loan:  All closing will be different – Take your time with your lender and ask what each is.  Remember when you applied for the loan you asked for a good faith estimate – there shouldn’t be many surprises.