If you’re looking to buy a home in Frisco, it’s important to be aware of the various costs associated with the process. In addition to the price of the home itself, there are several other costs that you may need to consider, including private mortgage insurance (PMI), closing costs, and property taxes. In this blog post, we’ll take a detailed look at each of these costs, and how they can impact your home-buying journey.
At Gravitas Property Group, our experienced agents have helped countless clients navigate the complex world of home buying. We understand that buying a home is one of the biggest financial decisions you’ll ever make, and we’re here to guide you every step of the way. So, let’s dive into the costs you need to know about when buying a home in Frisco.
Private Mortgage Insurance (PMI)
When purchasing a home with a down payment of less than 20%, lenders require borrowers to obtain private mortgage insurance (PMI). PMI is designed to protect the lender in case the borrower defaults on their mortgage payments. This insurance is an added cost for the home buyer, which typically ranges from 0.3% to 1.5% of the original loan amount per year. The PMI premium is included in the borrower’s monthly mortgage payment, increasing the overall cost of homeownership during the initial years of the loan.
While PMI adds to the cost of your mortgage, it’s important to remember that it is not a permanent expense. As you make payments on your mortgage, you gradually build equity in your home. Once you have built up enough equity, usually by paying off at least 20% of the original loan amount, you can request to have PMI removed. Lenders will usually removed the PMI once the loan-to-value (LTV) is around 78% and this is specifically for conventional loan financing. This can significantly reduce your monthly payments, making your mortgage more affordable in the long term.
For many borrowers, reaching the point where they have enough equity to eliminate PMI can occur faster than they might anticipate. Factors such as property value appreciation or making extra payments toward the principal can expedite this process. Once you believe you’ve reached 20% equity, it’s a good idea to contact your lender to discuss the possibility of canceling your PMI, thereby reducing your monthly financial obligations.
If a borrower opts to use FHA financing, mortgage insurance is still a factor. The federally backed FHA loan comes with a mortgage insurance premium (MIP) that will never be removed and stays for the life of the loan.
Closing Costs
Closing costs are the various fees and expenses that must be paid at the time you finalize the purchase of your new home. These costs can vary widely based on several factors, such as the home’s price, its location, and the type of mortgage you are obtaining. Generally, closing costs range from 2% to 5% of the purchase price of the home, making them a significant financial consideration for buyers.
The specific closing costs you may encounter include appraisal fees, title insurance, origination fees, underwriting fee, lender’s processing fee, buyer’s broker fee, attorney doc prep fees, and taxes, among others. It’s important to budget for these costs ahead of time to avoid any last-minute surprises at the closing table. Additionally, some closing costs can be negotiated between the buyer and seller. For instance, depending on market conditions at the time, you might be able to negotiate for the seller to cover some or all of the closing costs to help facilitate the deal. Understanding and planning for closing costs can help ensure a smooth and successful home-buying process. Working with a good real estate agent who can explain all of these costs and who is skilled in negotiations is very important.
Some common closing costs include:
– Appraisal fee: This fee covers the cost of having a professional appraiser determine the value of the property.
– Title insurance: This insurance protects you and your lender from any disputes over ownership of the property. It is a necarry cost, that could save you from major financial problems down the road.
– Attorney doc prep fees: Attorneys are involved in every transaction but they usually are not representing anyone. Attorneys are used to draw up several of the legal documents needed to tracer ownership.
– Buyer’s broker fees: This cost traditionally used to be covered by the seller. In recent months, legal settlements have facilitated change in the industry that now may have buyers paying for their own representation in the transaction.
– Recording fees: These fees cover the cost of recording the sale with the local government.
– Home inspection fee: This fee covers the cost of having a professional inspector check the home for any potential issues.
It’s important to work with a trusted real estate agent to help you understand the closing costs associated with your specific home purchase. At Gravitas Property Group, our agents are well-versed in the local market and can help you navigate the closing costs to ensure there are no surprises on closing day.
Property Taxes
Property taxes are another important cost to consider when buying a home in Frisco. Property taxes are assessed by the local government and are based on the value of your property. These taxes are typically due twice a year, and can be a significant expense for homeowners.
It’s important to note that property tax rates can vary widely depending on the location of the property. Some areas may have higher tax rates than others, so it’s important to do your research before making an offer on a home.
At Gravitas Property Group, we have a deep understanding of the local market and can help you find a home that fits your budget, including property taxes. Our agents can also help you understand how property taxes are assessed in Frisco, and what you can expect to pay based on the value of the home you’re interested in.
Working With the Right Team
Buying a home in Frisco is a complex process, and there are many costs to consider beyond the price of the home itself. Private mortgage insurance (PMI), closing costs, and property taxes are just a few of the expenses you’ll need to plan for when buying a home in Frisco. Our team can help you learn about the rest, along with a plan to help you budget for these expenses.
At Gravitas Property Group, our experienced agents are here to help you navigate the home-buying process from start to finish. We can help you understand the costs associated with your specific home purchase and ensure that there are no surprises along the way. Contact us today to learn more about how we can help you find your dream home in Frisco. We are happy to answer any questions you have about the home buying or selling process. (817) 646-5515