Buying a home can be an exciting time — but it can also be an expensive time. That new-home price tag is just the beginning of all the fees and costs that can stack up before your transaction is actually complete. By the time you get to the closing table, you won’t be looking for any “surprises,” so find out what hidden costs might be out there — and what you can do to avoid them.

Earnest money

You may already be aware of earnest money, or the money you “pledge” as good faith when your offer on a home is accepted. What you may not know, however, is that your earnest check will be cashed immediately. Of course, this money will go toward your down payment, but you’ll no longer have any access to it.

Home inspection costs

Whether your lender requires it or you decide yourself to get a neutral, third-party home inspection, be prepared to pay for it. Be careful before deciding to save some money and avoid this step — many structural flaws may not be obvious to the naked eye. According to statefarm.com, your inspection may cost upward of $300, but may identify some very important issues.

Taxes

Sure, you know that, as a homeowner, you’ll be required to pay property taxes. But did you know that you’ll need to prepay those taxes prior to closing on your home? That tax prepayment can be a good chunk of change, so be sure you know exactly how much is required.

Title insurance

If you’re buying a house with a mortgage, your lender will require you to purchase title insurance, which offers indemnity against claims of ownership to the home. However, that policy only protects the lender. You may want to consider purchasing an owner’s policy as well. It’s a common custom for sellers to purchase an owner’s policy for the buyer as an act of good faith, so you may want to negotiate these fees to save some cash.

Homeowner’s insurance prepayment

Your mortgage lender will also require that you have a homeowner's insurance policy in place — and you’ll likely need to prepay the policy several months in advance. These costs will be part of your escrow account, or the third-party account from which your lender pays your property taxes, insurance premiums, HOA dues and other required fees.

Appraisal fees

Closing your transaction also requires you to cover a home appraisal to reassure the lender that the home is worth the asking price. You should have an idea of what your appraisal fee will be from your Good Faith Estimate, which your lender is required to give you within three days of receiving your application. Your estimated appraisal fee cannot increase by more than 10 percent at closing, so point out any discrepancies should you find them.

Points

Your lender may offer you a lower interest rate in exchange for prepaying mortgage “points.” Points are simply prepaid interest which lowers your ongoing interest rate. This can be a good idea for some, but if you’re planning to sell or refinance within a short time period, prepaying points will likely be a waste of your money. [Zionsbank.com](<https://www.zionsbank.com/residential-lending-center/what-to-expect.jsp#Should I pay discount points in exchange for a lower interest rate?>) advises calculating your monthly savings of paying points and determining the time period you’d need to stay in the home (without refinancing) to make the points worth the upfront spend.

Origination fees

Your mortgage origination fee is essentially your lender’s profit on the transaction. According to myfico.com, you may be able to negotiate some of these fees by working with your lender.

Prepayment penalties

It goes without saying that you’d like to pay off your mortgage sooner rather than later, but some loans have prepayment penalties that can make an early payoff a burden. Be sure to thoroughly read your mortgage documents and ask your lender to explain any sections that are difficult to understand.

Mortgage insurance

If you’ll be putting less than 20 percent down on your home, you’ll likely be required to pay mortgage insurance. According to [zionsbank.com](<http://www.ksl.com/ad_logger/ad_logger. php? location=http://www.zionsbank.com/residential-lending-center/what-to-expect.jsp#What is mortgage insurance and when is it required?& sponsor=zionsbank-hiddencosts-body4>), your mortgage premium will be based on your loan-to-value ratio. You may be able to cancel this insurance premium once you’ve reached 20-25 percent equity in the home, so talk to your lender to get specific instructions.

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice.

Zions Bank® Member FDIC, Equal Housing Lender, NMLS# 467014 ZionsBank.com®.

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