1.  Home Inspection

Cost: $350–$500+

A home inspection lets you know of any potential problems — like mold, bad roof, water pressure, crawl space issues, etc. An inspection lets you know what you’re getting into before you buy.

Even if it costs more, it’s better to pay extra for the right inspectors or specialized experts (mold, side sewer etc.) as needed. It’s also important for first-time buyers to educate themselves on what a home inspection does and does not cover.”

You should always attend the inspection so buyers can ask questions and learn about the house from a trained professional.

2.  Appraisals

Cost: $750-800+

The appraisal is ordered after you have signed your lender’s loan disclosures.  It can take 7-14 days for the appraiser to inspect and deliver the completed report.

The appraiser comes up with the value of the home by comparing recent sales that are nearby and similar to your home based on its size, location, and condition.

If you have paid more than listing price you want to have your agent look at other sales and the likelihood of a low appraisal.  You agent will can give you your options if your home doesn’t appraise as you were hoping.

3.  Home Insurance

Cost: $650 – $1,500 per year on average

Home insurance protects your house and belongings from disasters like wind or hail storms — but a word of warning: It isn’t cheap, so it makes sense to shop around.  Homeowners or also known as hazard insurance provides financial protection of your home and belongings.

Make sure you ask your agent about multi-policy discounts and increasing deductibles to keep your annual premium down.

4.  Credit Report

Cost: $20-$50

Before you start the home-buying process, you should request a credit report to make sure your credit is in good shape. The Federal Trade Commission recommends AnnualCreditReport.com as a free source for seeing your credit report, but you will not get your credit scores with the free report.  The report will tell you all about your previous credit and debt history.

You can use one of the many free resources to track your credit scores.   There are so many great education sites to help you with understanding credit and your credit scores, like, TransUnion.com, Equifax.com, Experian.com and MyFico.com.

5.  Private Mortgage Insurance

Cost: 0.26% to 1.86% of the original loan amount per year

If you can’t afford a down payment of 20% on a house, you will likely pay for private mortgage insurance (PMI). Buying this type of insurance might help you get the loan you need, but there is a cost and it will be in your monthly mortgage payment. MI cost on a conventional loan is based on the percent of down payment and your middle credit score.

You can pay for this through a monthly premium, a one-time upfront premium, or both, and the costs of these are located on your Loan Estimate and Closing Disclosure documents.

There are two types of mortgage insurers: private insurers that offer mortgage insurance (MI) on Conventional loans and government agencies, notably the Federal Housing Administration (FHA). FHA and MI support efforts to expand homeownership by allowing low down payments, down payment assistance and expanded underwriting.

MI helps serving underserved communities. MI also promotes affordable homeownership for borrowers unable to make a down payment of 20 percent.

6.  Flood Certification

Cost: $20 (and more if the house is in a flood zone)

Lenders will require a Flood Hazard Certification to review and determine whether or not your house is in a flood zone.

If the home is in a flood zone, you’ll need to be prepared to pay a whole lot more to protect your home with flood insurance that can get pretty pricey!

Remember to ask the seller if the home has ever been flooded.  The damage done with a flood can be devasting, so make a sound decision when purchasing.  Ask Questions!

7.  Property Taxes

Cost: $2,400 – $7500 on average per year

This cost is a big one. Property taxes in Washington are paid twice a year (April and October) to fund things like local schools and the fire department. The annual cost is substantial and it is based on the county/city’s levy tax rate and your home’s assessed value.

A good rule of thumb is 1% of the value of your home.  Example:  $300,000 value x 15 = $3,000 / year

8.  Title Insurance

Cost: $850 – $1400 – based on the loan amount

Title insurance fees basically ensure that “your new home is fully and legally your own.”

When you buy title insurance for your property, a title company searches these records to find – and remedy, if possible – several types of ownership issues. First, the title company searches public records to determine the property’s ownership status. After this search, the underwriter will determine the insurability of the title.

If you take out a mortgage loan when you buy your property, your lender will require a loan policy of title insurance.

9.  Recording and Settlement Fees

Cost: $450-$650 on average for recording fees.

Recording is the cost to file the Warranty Deed and Deed of Trust at the county courthouse.  The Warranty Deed places the buyer as the owner of the home and the Deed of Trust is for the lender’s lien.

Cost: $750-$1450 – based on purchase price of the home.

Settlement fees or escrow are fees from the closing agent.  Fees like escrow, mobile notary fees, courier, wire and doc prep fees.   The higher the sales price the higher the cost for the Closing Agent (escrow).

In a purchase transaction escrow executes the contract between the buyer and seller and ensure the orderly transfer of funds and title from the seller to the buyer.

Bottom Line

The closing costs owed when someone purchases a property can be substantial. Specific closing costs vary depending on the type of property you’re buying, whether you’re using financing and even your specific purchase agreement. While some of these items are paid by sellers, buyers should expect to pay between $6500 – $8500 as closing costs, in addition to their down payment.

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