Planning for Homebuying Expenses

April 26, 2019

Real estate agents, lenders, and appraisers know all too well; there are expenses that should be anticipated in the earliest days of planning for your FHA home loan and saving for them should be a priority.

What does a first-time home buyer need to anticipate for a new home loan?

Appraisal Fees

FHA home loans require appraisals and the borrower pays the appraisal fee. This expense may be part of your required cash to close and this is an expected cost of doing business as a real estate buyer. But if corrections are required as a result of that appraisal, you may be required to pay for an additional look at the home known as a compliance inspection.

That is an expense you are better off anticipating in advance just in case.

Up Front Mortgage Insurance Premium

FHA mortgages require an up-front mortgage insurance premium which can be financed or paid in cash. If your goal is to lower the overall cost of the mortgage in the long run, it’s best to pay this up front rather than rolling it into the loan amount.

Also, you cannot pay this premium in part and finance the rest-you must either pay in full up front or have the entire amount rolled into the mortgage loan amount.

Financing the premium will not change your FHA loan limit, which is calculated without the Up Front Mortgage Insurance Premium. Financing the premium will not lower the amount of loan money you have to buy the home with.

Home Inspection Fees

The home inspection is optional, but incredibly important. The borrower is solely responsible for arranging and paying for this inspection which should happen no matter what kind of home you are buying. The appraisal is NOT the same as an inspection; even the FHA/HUD official site says so.

If you buy a home only on the strength of the appraisal and choose not to get the home inspected, the FHA and the lender cannot help you if things go wrong with the home later.

Real Estate Agent Commissions

If your transaction involves a realtor, you should know that in many cases the seller pays the real estate agent fee, but in some instances the seller may try to negotiate with you to share the cost in some way. You may not necessarily pay more in hard cash out of pocket here, but it helps to expect that the seller may ask and prepare to haggle.

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