So, you have decided to take that next step in life and become a homeowner. You have sat down with a lender which has pre-approved you to purchase, met a real estate agent that you are comfortable working with and that will have your best interests in mind, picked the place, submitted an offer and that offer has been accepted by the seller. Congratulations!

Now you are being asked to submit funds for Earnest money, order a property inspection, and prepay for an appraisal before you even own the house. At closing you see lender costs, and title fees. WHAT??? Where did these costs come from and why are you responsible for paying them? Let’s go over these items so you are not blindsided when these events come up.

Earnest Money is a good faith deposit that shows the seller of the home you are looking to purchase that you are serious about the offer you have just submitted. This also holds you accountable to hold up your end of the terms in the contract, as you can lose your earnest money if you are in breach of that contract. If you have a great agent on your side, they will be looking out for you to make sure keep your earnest money.

A property inspection is an inspection done by a certified professional that is looking for all of the flaws in the home, be it health, safety, major mechanical, structural, or just cosmetic. They have been trained to find these things for you and they, just like any other service provider, expect to be paid for their services.

An appraisal is an unbiased opinion of a home’s value done by a state licensed professional. Appraisals are typically required by your lender to evaluate the value of the home versus the price that you agreed to pay. Due to you being the one that wants to buy the home the lender requires you to pay for it.

You have made it to the closing table, Congratulations again! As the closing agent is going over the Buyer’s closing/settlement statement you will see that there are charges from both the title company and the lender. The lender should have covered the costs associated with obtaining the loan from them a couple of days before closing and they typically include costs such as your credit report, administration, processing, and underwriting fees, and monies held in escrow for insurance and taxes. The title company does not work for free either so you will also see their costs on the same statement and those are typically the closing fee, lender’s title insurance, doc prep and a few other miscellaneous fees.

In short, there are no two real estate transactions that are one in the same. There are no homes, inspectors, appraisers, lenders, or title companies that are the same and neither are the costs associated with each one, so make sure you have a real estate professional in your corner to help guide you through the process with your best interests in mind.