Buying a new house is not something that you do every day, so you probably have many questions about the process. One common question among new buyers is what is the cost of buying a new home? Or more specifically, what fees and costs are the responsibility of the buyer and of the seller? The good news is that mortgage lenders are required to furnish you with a Good Faith Estimate (GFE), an outline of proposed costs, so there will seldom be any surprises at closing about the exact costs. You can ask your lender or real estate agent for an example of the GFE at any time, but here are some of the costs that you will be responsible for when buying a new home.
Buyers Cost of Buying a New Home
The bad news is that the buyer is responsible for the majority of the fees when buying a new home, at least when counted by line item. The good news, is that even with all the different fees, it is the seller that bears more of the total cost at closing. Most of the buyer’s costs originate with the mortgage loan, so if you are lucky enough to be able to pay cash, you can avoid some of these fees.
A new home buyer will receive a loan estimate form from their mortgage lender that spells out the approximate costs to the buyer. These forms are generated early in the loan process and can be generated at any time the buyer has a question. The most typical fees include the appraisal fee, origination fee, credit report fee, bank processing fee, recording fee, notary fee, flood certification fee and tax servicing fee. They will also have costs for prepaid interest, prepaid insurance and title insurance. In addition to these fees, there may be other expenses such as property taxes, community and homeowner association (HOA) dues that are prorated based on the actual closing date.
Negotiable Costs of Buying a New Home
The home buyer should take the time to work with the mortgage lender and real estate agent to understand each line item. It is important to be knowledgeable about each fee and how it affects the total cost at closing. While most of the fees are not negotiable with the bank or mortgage lender, it is possible to work with the seller to see if they will pick up some of the closing costs. Getting a $4,500 credit from the seller towards the closing costs, will mean more to the buyer than having the seller lower the sale price by that amount. This would mean less of an out-of-pocket outlay than a price reduction. This strategy works better in a buyers’ market, but it is worth it to ask the question of the seller before moving forward.
As to what the sellers pay, there are far fewer individual costs and line items overall. The seller is responsible for the real estate commission on the sale of the home. This is based on a percentage of the sale and often adds up to a larger amount than the buyers will pay at closing. The most common real estate commission is 3% of the sale price to each of the seller’s and buyer’s agents, although this can be negotiated before retaining the real estate agent. The seller may also have to pay any balance on their property taxes and the prorated community and homeowners association dues.
Get Help Understanding Home Buying Costs
If you are in the market to buy a new home, it is wise to contact a good mortgage lender that can help you through the buying process. A mortgage lender can work with you to get pre-approved and pre-qualified which will strengthen your position at the bargaining table. A lender can also explain all the costs and fees of buying a new house. If you do not have a lender in mind already, Homes by WestBay can provide the names of good, qualified lenders in the Tampa area.
Homes by WestBay is a premier new home builder in the Tampa area. They are locally owned and operated and have well-established ties with top lenders in the area. When looking to purchase a new home, give WestBay serious consideration. They build in some of the top new neighborhoods in the Tampa Bay market and are known for their thoughtfully designed floor plans and exquisite attention to detail. Take a look at some of their model homes (open daily) or go the their website at www.HomesbyWestBay.com to see the variety of homes, floor plans and elevations that they offer to new homebuyers.