The Costs of Buying and Financing a House

We’ve got our final cash-to-close number for the house – and even after we put the down payment, pre-pay 9 months(!!) of escrow, buy all the new appliances we need, and pay the movers to actually move us in, we’ll still have about 6.5k left over to do with as we please.  We already have a list of things we want to buy for the house to “improve” it – like blinds, a humidifier, and a deck – in that order most likely.

What does it take to buy a house?

We’re putting 20% down, we have a 3.875% rate (no points), and we’re borrowing just over 293k.  Some of these costs are based on the APR and the purchase price, so that’s why I give background 🙂  I’ve rounded off the numbers using the standard round down if less than 50 cents, round up if more than 50 cents.

Underwriting/Processing fees: $1297

Appraisal, credit report fee, etc: $844

Title Charges (mostly lender’s title insurance): $3119

Taxes/fees to the local governments: $3967

HOA origination fee: $200

Total closing costs (that we’ll never see again): $9427

Then there’s the pre-paid amounts – this includes the first year of homeowner’s insurance ($420/yr through USAA!) 1 day of interest, 3 months of homeowner’s insurance, and 9 months of property taxes (there are three: “Property taxes”, “city property taxes”, and “school taxes”).  If I didn’t escrow, the rate would have been > 4%, and there’s no way I can make that up in interest on what sits there waiting to pay taxes.

$7215 (most of which is school taxes of $4464 <- about a year’s worth of property taxes in NoVA)

For a grand total of: $16,642 in closing costs and fees, about $9500 of which is just “gone” to never be seen again (aka the “cost” of financing/purchasing).

Now, there are likely better rates available, and better closing cost prices, but we’re getting a 35k credit from the builder for going through their lender, which pretty much makes up for any extra costs (and lowers our property taxes over time since they’re based on the purchase price of the house, and the purchase price is where that 35k came off).  That’s hard to compete against.

10 thoughts on “The Costs of Buying and Financing a House

  1. Sue

    Congrats on the house! Once you have your mortgage set (I think you mentioned a possible refi in a previous post), will you pay as scheduled or pay it off ahead of schedule?

    Reply
    1. Mom Post author

      Once we’re moved in and sort of settled, there are a few local banks known for low interest rates that I will shop around to see what the closing costs might be and if the rates are worth the hassle. For the time being, our plan is to pay just a rounded up number (~ $50 extra per month) until we pay off our car loan and build up a 6mth efund, then we’ll reevaluate at that point. I lean towards just continuing to pay the rounded up number and invest the rest. We want to retire in 10 years, and we are pretty sure we’re not going to be staying in this area for much longer than that (depends on where Daughter Person wants to go to High School/College) so paying it off early seems like a not so great choice, especially at the low interest rates we’ve got.

      Reply
  2. Mrs PoP

    Buyer pays title insurance? We’ve always had the seller pay that in the past and just assumed that was standard since it’s always been a part of our boilerplate contracts.

    Reply
    1. Mom Post author

      As buyers, we’ve always paid lender’s title insurance, but it makes so much more sense for the seller to pay that – after all, that’s who’d likely be ‘at fault’ if there was a problem…

      Reply
  3. donebyforty

    Ah, Pittsburgh taxes…on the plus side, the schools are generally really good so I suppose you’re getting something for the money. 🙂

    Thanks for sharing this information. Understanding the costs associated with buying a home seems to be a gap in most home buyers’ knowledge (and maybe even with a lot of personal finance bloggers). A lot gets written about credit cards, travel hacking, how to save on this or that…but hardly anyone is writing about the huge costs that come with buying a home, and which can be negotiated, or how. Well done.

    Reply
    1. Mom Post author

      I’m not sure we’re getting much for our school taxes. We moved from one of the best school districts in the country, and it had half the property taxes on a similar sized plot of land, but the property was assessed at 200k more than our new house. I would assume other school districts could manage on less for less results 😛 The school district we’re moving into is building a new high school, so the rates are increasing every year. I would really like to evaluate how the schools are funded here in PA vs other states, say, MD or VA where property taxes are much lower, but they have the top two school districts in the country. I haven’t run the numbers yet, but I suspect we’re paying a lot more in taxes in PA than we were in VA – despite PA’s state rate being 3% and VA’s being 6%.

      Reply
    1. Mom Post author

      Thanks! Property taxes are very high in this county (Allegheny). We did know this coming in – my mom lives in the same county (different school district). We could have moved further out to a different county for lower taxes, but the savings wouldn’t make up for the longer commute for me.

      Reply
    1. Mom Post author

      The schools are just OK, not spectacular, although they’re building a new high school and the entire elementary school only has ~500 kids. We could have traded a much longer commute for lower property taxes by moving out further (to a different county), but my 40 minutes is already pushing my limits.

      Reply

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