What Are the Prepaid Costs on a Mortgage When Buying a Home?
The thought of owning a home can be exciting, but it's vital to prepare for the expenses. When buying a house, you need to cover certain prepaid expenses before the sale can go through. These prepaid fees include items like homeowners insurance and property taxes. Let's discuss prepaid costs on a mortgage when buying a home in Owings Mills or elsewhere in Maryland.
What Are the Prepaid Costs on a Mortgage?
Explaining an Escrow Account
When you first acquire your mortgage loan documentation, it may be challenging to find information about your prepaid costs. Generally speaking, you can find prepayment charges on the second page of your loan estimate, often labeled as "additional fees" following the defined closing costs.
When buying a home, prepaid costs go into an escrow account. The escrow deposit covers property taxes, homeowners insurance premiums, and other costs involved in the loan process. You must make these payments before you can take ownership of your new house.
The county will require prepaid payments for any real estate transactions. For example, if you're buying a home in Baltimore County, the county will usually collect prepaid property taxes, which are often due in December. Keep in mind that interest rates may increase if you do not pay your taxes on time.
Another prepaid cost with buying a home includes homeowners insurance premiums. Homeowners insurance is a requirement for accessing the escrow account of your new house.
These prepaid costs go to your insurance company and will cover any damages on the property, as well as personal liability costs if someone gets injured while visiting you.
The buyer is responsible for paying appraisal fees. An appraisal ensures you're getting a fair deal on your home and will cover any potential miscommunication between both parties at closing. Additionally, an appraisal report may be required to finalize the property purchase, especially if there was not one done before work began on it or when buying land.
Although these aren't technically prepaid costs, it's best to include them in this discussion. Closing costs go to the lender for items like title work and legal fees. In some cases, the seller may cover these.
How Equity Mortgage Can Assist with Understanding Prepaid Costs with Buying a Home
Since 1986, Equity Mortgage has helped prospective homebuyers understand these upfront costs. We also help with free mortgage pre-qualification, mortgage analysis, and fast turnaround times. In fact, we can get homebuyers pre-approved in as little as 24 hours. Along with home purchases, we also offer help with home refinancing and reverse mortgages.
Need help with the home buying process? Call Equity Mortgage today at 1-800-332-9221.