Battling against hidden costs in your home loan

Battling against hidden costs in your home loan

Buying a home is pretty straightforward until you see the bottom line. We think we are going to pay one price, we expect a few unexpected expenses to pop up and then all of a sudden it’s a lot more than what we had originally thought in our head. It can wreak havoc on a tight budget and make the process of home buying a little more frustrating and less appealing in the future. However, if you go into the process with an understanding of some “hidden” costs that will pop up, there are ways for you to prepare and avoid unnecessary stress and fees.

Take A Homeowner’s Class

Even if you have already purchased a home in the past, taking a class that is all about purchasing a home will help you be prepared for the ins and outs of the process. You will learn more about those “hidden” fees and you may be able to alleviate a few of them with some localized tips and tricks of the trade.

The Credit Report Fee

Any lender you go to is going to pull your credit report before offering you a loan. It’s a well-understood fact and yet the fee is often what surprises people. We don’t pay a fee for a personal loan or for obtaining a line of credit. Yet, many lenders do charge a fee for pulling your report for a house. On average, that cost can range from $30-$50. It doesn’t sound like much but you can find ways to alleviate that fee. Firstly, you can try negotiating with the lender. Asking for it to be removed is better than not asking and the worst thing they will say is “no”. Secondly, you can ask if you can obtain the credit report yourself. If you are taking a homeowner’s course, you may have the ability to get your credit score through that class for free or for much less. In western North Carolina, you can obtain the report for free or at a deeply discounted rate at OnTrack.

The Junk Fee

Junk fees, also known as garbage fees, are these fees that pop up and seem out of place or inflated. Things like an application fee (not to be confused with a credit report fee) or a mortgage rate lock fee are ones that should cause an eyebrow to rise. If something like that pops up, ask the lender for details. You can press for them to be removed, don’t be afraid to stand up against such fees!

No-Cost Loans

No cost loans are extremely attractive to those with a tight budget who are really wanting to buy a home without putting much out upfront. Here is the problem with the no-cost loan, you will pay for it later. More often than not, no lender closing fees translate into a higher interest rate. Which also means you could be paying more than you should for those fees itself. It is far better to have the money saved up to cover some fees and negotiate what you can.

Budget For It All

Creating a budget that allows for you to save up the money you will need to buy a home is the biggest way you can combat the hidden fee. Being financially prepared and budgeting your time for negotiations will keep the stress to a minimum and allow you the power to get the house you really want.

A Basic Rule Of Thumb

One thing to remember is that not all fees are “hidden” or even “junk”. Some fees are regulated by state and city governments and have nothing to do with the lender at all. Appraisals and inspections are such fees and you should be fully prepared for those.

Remember, lenders do need to make some money off their loans from you. Some fees are justifiable and you won’t be able to negotiate all of them. Patience, a sweet smile, and a pleasant disposition can help you get far!