First-time home buyers expect to pay earnest money (about 1% of the purchase price) when they bid on a home, plus a down payment of 3% to 20% at the closing table.

But beyond the fees you may be expecting, there may be some surprises like a $200 “doc faxing fee.” While these costs aren’t exactly “hidden” and should be on your Closing Disclosure, they are often overlooked, especially by first-time buyers.

So which fees should you expect and which should you be wary about or question outright? We’ve laid out some fees you can expect before, during and after your loan closes.

Before Closing: Inspections

You’ll want to schedule and pay for a thorough home inspection – in fact, your lender may require one. At a minimum, you’ll want a general inspection of the house and an inspection for wood-destroying insects (like termites). It’s a good idea to be on-hand with your real estate agent for the inspections. (Use our inspection checklist.)

In you aren’t using a lender, you won’t be required to get an inspection, but you might want to anyway. Your first home is a big purchase, so it’s best to err on the side of caution and know what you’re getting into. 

The general inspection will likely cost a few hundred bucks, and the termite inspection typically costs around $100. Depending on the age and condition of the house, you may also want to schedule a sewer inspection, which can be another couple hundred of dollars.

Before you balk at the cost, think about it this way: A thousand dollars is a small price to pay to avoid getting a lemon.

If the inspection finds that the house will require immediate repair, you have two options: You can negotiate with the seller to have them pay for or complete the repairs, or you can pull out of the deal entirely.

In some states, the seller is required to disclose if a previous buyer backed out of the deal after they conducted a home inspection.

At Closing: Fees to Anticipate

The Consumer Financial Protection Bureau requires lenders to provide you with a Loan Estimate that will include a detailed list of your closing costs. You should expect closing costs to be 2% to 5% of the purchase price.

So, if you’re buying a $200,000 home, expect to spend between $4,000 and $10,000.

These costs usually include:

  • Appraisal fee: An appraisal is typically mandated by the lender to make sure the home is worth the sales price.
  • Title/attorney fees: These include necessary government filing fees, escrow fees, notary fees and other expenses related to transferring the deed.
  • Escrow fees: You may have to pay portions of property taxes and insurance upfront into an escrow account.
  • Lender fees: This covers items ranging from administrative costs and pulling your credit report to wire transfer fees.
  • Loan interest: You’ll need to pay interest on the loan prorated from the closing date to the first of the following month.

With that in mind, be sure to ask your lender about fees you may not understand or think could be lowered. Some third-party charges, such as appraisals and credit report fees, won’t be negotiable. Other costs, such as title insurance, rate lock fees and courier fees may be more flexible.

Also watch for “garbage” fees, things like application fees, underwriting fees and loan processing fees. If the fees seem vague, you may be able to push them back to have them lowered or eliminated.

After Closing: Taxes, Maintenance and Improvements

Monthly mortgage calculators don’t always include the cost of your property taxes and insurance, which can add up. Mortgage insurance can range from 0.5% to 1% of the cost of your loan.

You’ll also need to factor in the cost of household maintenance and repair. One popular rule of thumb is to budget 1% of the purchase price of your home annually for repairs.

And of course, you may need to buy appliances and furniture, so be sure to budget in advance for those costs.

Finally, if you plan to remodel, be aware that even the smallest kitchen update can cost upward of $10,000 and as much as $30,000 or $40,000 for larger projects. While pricey, that investment could pay off down the road when you sell the home.

Most of all, best of luck on your home search. We hope being able to plan for expected costs – and those somewhat surprising ones – will help you transition smoothly into homeownership.

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