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Know the Hidden Fees Involved in Buying a House

Housing prices have fallen considerably the last two years. And this has happened across the country, in even its most desirable markets. But this doesn't mean that buying a house isn't an expensive proposition. In fact, there are several hidden fees involved in buying a house.

Most of these fees are hidden in closing costs. These are the charges home buyers pay when they take out a mortgage loan to pay for their new residence. These hidden fees cover everything from the work done by your real estate attorney to the money your mortgage lender charges to print copies of your financial documents.

The amount of closing costs that buyers will pay will vary by state and depending on the type of property they buy. In general, though, home buyers can expect to pay about from $3,000 to $4,000 in closing costs when they buy their new home.

This sometimes shocks new home buyers who are already stretched thin financially. Buyers, though, should be prepared for these hidden fees involved in buying a house. And they should make sure to save enough money to cover them.

One of the biggest fees buyers should expect to pay is for title insurance, with this cost usually running near $400. Title insurance is important, though: It protects buyers in case someone comes forward in the future with a lien against the residence.

Some buyers may have to pay about $300 for a real estate attorney, too. In some states, in fact, buyers are required by law to pay for an attorney to sit at the closing table. Real estate attorneys make sure that all paperwork and documents signed during a housing transaction are properly filled out.

Some mortgage lenders charge as much as $300 for an application fee. This fee covers the work that the lender does in preparing the paperwork for the real estate closing. However, many lenders today don't charge this fee as a way to bring in more business. Buyers interested in cutting their closing costs may want to search out those lenders who've done away with the application fee.

Buyers won't be able to avoid paying an appraisal fee, though. This fee, which usually runs about $350, pays for the services of a real estate appraiser who determines how much a home is worth. Lenders require appraisals to make sure they're not passing out too much mortgage money for a particular residence.

One of the more variable hidden fees that buyers will encounter are so-called local fees. These fees vary greatly by region, with some big cities charging significantly higher fees. In general, though, local fees should cost home buyers about $110.

There is one sure way for buyers to make sure they're paying as few hidden fees as possible: They'll have to shop around. Closing costs can vary widely depending on which mortgage lender buyers work with. Some, for example, will charge what industry professionals refer to as junk fees, excessive fees for paperwork and processing. The best way for consumers to avoid paying too much, is to interview several mortgage lenders about their fees.

Lenders do have to present potential borrowers with a Good Faith Estimate. This estimate spells out the fees they charge in general terms. Some fees may be higher or lower than they appear on the Good Faith Estimate, but this paperwork at least gives buyers a basic idea of what they'll be paying at the closing table.

Consumers don't like being surprised by extra charges. That's why it's so important for them to educate themselves, and to know the hidden fees involved in buying a house.