While all the costs involved in buying a house are required by law to be disclosed, there are expenses that aren’t widely known and may surprise buyers.
“You can have surprises though,” Starkey Mortgage Sherman Branch Manager Vanya Griffith-Mayes said. “For example, your appraisal can come back and you might need inspections you weren’t expecting.”
According to Griffith-Mayes, lenders require that repairs be done due to inspections before funds are granted. Some common inspections include septic, termite and structural.
“Lenders depend on appraisals; they have to make sure the house is sound,” Griffith-Mayes said. “And in this area, you have the added consideration of our expansive soil. A structural engineer can cost $250 to $500 that you may not expect.”
Griffith-Mayes noted that lenders want to do it right when it comes to lending for residential properties. Even considerations such as escrow accounts or flood insurance can be a requirement, which will drive up the overall cost of obtaining a home.
Traci McCarthy, a real estate agent with Ebby Halliday Realtors in Sherman, said a common cost is the option fee.
“As a buyer, you put up money for so many days before a contract becomes official to allow you to do an inspection or another necessary process,” McCarthy said. “If you get out (of the contract), you don’t get that money back. It’s usually not huge, but it’s usually money you don’t expect to pay.”
She also listed earnest money as another cost buyers may not expect. This is money to show that buyers are serious, earnest about purchasing the property. It is paid with the contract offer, she added.
“Nine out of 10 times, the buyer gets it back if you back out of the contract, but that one time you might not,” McCarthy said. “If you go through with the contract, you get that amount credited at closing.”
According to McCarthy, specialized inspections such as plumbing and electrical can add to the cost of buying a house. Not every property will require one, but buyers have to be prepared to pay if necessary.
“And you might end up with a residential service contract — as a buyer, you simply have to be prepared to pay more as the process continues,” McCarthy said. “You have to be ready for fees of all kinds.”
McCarthy also noted that working with a local lender is preferred as national mortgage companies might not communicate as well due to the distance.
“This is really the key to no surprises,” McCarthy said. “Local lenders are very good.”
Doris Caston, Red River Title Company manager, echoed the idea of local versus national companies.
“Many people check the online mortgages, and they see what looks like a great deal,” Caston said. “But it’s never a great deal. Go local all the way.”
Stephanie Clark, a loan officer with Sherman’s Landmark Bank Mortgage Division, said other costs are involved in the closing process.
“It’s the cost conscious verse the rate conscious concept; lenders may reduce some fees, but they can raise interest rates,” Clark said. “Be sure to understand discount points and origination fees. People sometimes underestimate what it’s going to cost.”
According to Clark, loan fees can be unexpected costs in the closing process as well. Federal loans all have upfront funding fees, and mortgage insurance premiums can translate into a higher cost.
“Be sure to ask questions and read the disclosure documents,” Clark said. “It’s all about communication at that point.”
Private Mortgage Insurance premiums are a concept that many potential homebuyers aren’t aware of, according to Griffith-Mayes. PMI protects the lender in case of default; it’s insurance for lenders that the buyer has to pay.
“You need to learn about it because mortgage loans require it,” Griffith-Mayes said. “If you don’t put 20 percent down on a commercial loan, the lender requires PMI.”
She noted that the federal loans require upfront and monthly fees as PMI. There are ways to combine PMI with a mortgage loan, but the bottom line is that the buyer will be paying more to purchase the home.
“It is amortized annually, so it can go down on commercial loans, but government loans are set,” Griffith-Mayes said. “Most buyers don’t think about it, but it can be significant.”