If you are like most people, buying a home is one of the more expensive purchases you will make. But even if you have a good idea of the financial decision ahead, unless you are a Realtor you probably do not know in detail the full range of costs and fees associated with a home purchase.
There can be a surprising number of additional fees to complete the sale, fees you will want to be aware of as you head into your real estate deal. For this reason I have prepared a detailed list of the additional costs and fees associated with buying a Massachusetts home.
This is a list of possible fees you may encounter when buying your home. Also known as closing costs, some are standard for any home purchase while others you may or may not deal with depending on the nature of your purchase. As a buyer it is important to be well educated as to what your costs will be before jumping into the real estate market. Surprises are never a good thing when it comes to spending money.
Common Massachusetts Home Buying Fees
- Property Tax – You may need to pay some of the property taxes due for the year you are purchasing the home. This usually involves paying the property tax from the date you purchase the home through the end of the year. Taxes are pro-rated from the time of closing until the end of the tax year. As a Massachusetts home buyer you are required to pay your fair share of taxes on a property.
- Closing/Escrow – Typically a title company or attorney will make sure the closing meets all state standards. This escrow fee runs around $2.00 for every thousand dollars of the purchase, as well as another $250 on top of the total fee.
- Home Inspection – Having the property your are considering purchasing inspected for problems by a licensed home inspector usually costs between $400 and $800. The inspection is a home buying necessity to ensure there are no issues with the house you are interested in calling home. This is a Massachusetts home buying fee that is worth every penny. As a home buyer the last thing you want is to be stuck dealing with the owners problems. The most common home inspection issues can not only cost a lot of money to fix but could also effect your well health and well being.
- Title Company Search – This cost will depend on the home you are buying and the company you use. You want to do a title search to make certain no one else has any claim to the property you are about to pay for. The title search is typically performed by the lenders attorney. The purpose of a title search is to ensure there are no defects or encumbrances that will cloud the title. If there is a lender involved a Massachusetts home purchase should come with a clean title. The cost of a title search is usually rolled into the closing costs on the loan charged by the lender.
- Recording Fee – The county in which you purchase the home will charge a fee to make the purchase part of the public record. Fee varies by county.
- Owner’s Policy Title Insurance – This protects you in case someone ever claims ownership of the property you buy. Costs can vary by insurer. Title insurance will always be carried by lenders. Homeowners however have the option to pay for title insurance that covers them as well. First American Title provides a handy calculator that will provide an estimate for the cost of title insurance in your area. If you are buying a home in Massachusetts just plug in the location and it will give you a ballpark figure for the cost of your title insurance policy.
- Flood Determination – Typically costing around $20, this will determine whether your new home is located in a flood zone or not. If it is, you will need to purchase flood insurance. Flood insurance is expensive but well worth it. Not having flood insurance can be devastating life changing event. While you will want to consult with a local insurance agent about the cost of an insurance policy Flood Smart gives answers some to some commonly asked questions about the cost of flood insurance.
Fees Associated with Financing
When you borrow money to pay for a Massachusetts home, you will encounter additional fees associated with taking out a loan.
- Application/Pre-approval – years ago it used to be more common for a mortgage lender to charge to give a mortgage loan pre-approval. Rarely is that the case today. For a very few select mortgage companies it is possible you may see a charge of a few hundred dollars. The mortgage pre-approval is a letter that says how much the lender feels you can borrow. The letter is used to show your financial strength to a seller. Pre-approval letters are designed to make a seller feel more at ease that you are a credit worthy borrower and will have no problem getting the needed financing.
- Credit Report – The lender you use will want to know what type of risk you present in order to decide on your loan amount and interest rate. To get this information the company will request a credit report, which usually costs about $30. This fee is typically wrapped into the costs associated with giving you the loan.
- Appraisal – Before a lender will loan you money on a home, it will need to verify that the property is actually worth what you are paying for it. This way if you default on the loan and the lender needs to sell the property for payment, it knows that the home will sell for enough money to cover the loan amount. As the buyer you will likely be the one paying for the appraisal, which can cost anywhere from $300 to $500. Again this fee is typically wrapped into the cost of getting a mortgage.
- Processing Fee – Home loans require a lot of paperwork, which you are expected to pay for. The process of looking over your loan application and finalizing your loan may cost upwards of $1,000. This is also a fee that will be wrapped into your loan costs.
- Lender’s Policy Title Insurance – This demonstrates to the lender that you do own the home and that the mortgage is legitimate. The cost of this insurance will vary by company. This is a mandatory fee that will be associated with any mortgage company.
- Underwriting Fee – The lender will charge another fee for reviewing the total loan application for approval. Known as underwriting, this fee can cost as much as $795. This is another fee that is rolled into the total cost of obtaining a mortgage.
- Pre-Paid Interest – The lender will expect you to pay the interest on your loan, paid up to the point where you are 30 days away from your first loan payment. The actual cost will vary based on the total loan amount and interest rate. This is a cost that you should plan for when purchasing a home as you never know when the closing date will end up on the home you eventually purchase.
- Mortgage Insurance – The commonly used term for mortgage insurance is PMI. While lenders usually prefer that you have 20% down on the home you buy before they will give you a loan, many buyers these days do not have the full 20%. If this is your situation, you can often still get a loan – you will just need to purchase mortgage insurance to get the loan. Mortgage insurance is designed to protect lenders against you defaulting on the loan. Because you do not have the 20% you are considered a greater lending risk and the lender will want coverage through mortgage insurance. This type of insurance will be based on a number of factors, including the amount of your mortgage, your down payment, your credit score and loan terms. An average rate for mortgage insurance is around $50 per $100,000 of the loan.
- Lot survey – One of the things that a lender will do as part of their obligations when a borrower gets a mortgage is to do a mortgage plot plan or lot survey. These are not as accurate as a tape survey and essentially just locate the house and any other structures within the lot lines of the property. These surveys are done to make sure that the property conforms to local zoning laws. The cost of a survey will be a few hundred dollars and is yet another cost that will become part of the buyers financing costs.
All of these fees are commonly what is referred to as closing costs!
Optional Home Purchase Costs
There are a few other fees you might need to save for, depending on the home you are purchasing. These are the costs of buying a Massachusetts home that are essentially optional but certainly recommended.
- Pest inspection – Most home inspectors will check for bugs when inspecting a home. It is part of the standard service they provide. There are however some buyers who want a separate inspection from a pest expert. It could be there is some fear of termites, ants or other rodents. Expect a general pest inspection to run anywhere between $100-$200.
- Radon in air inspection – Radon is an odorless gas that can cause lung cancer. Ask the seller if the home has been tested recently. If not it is probably worth testing for safety reasons. At-home tests can be gotten fairly cheaply, while a professional inspection with a monitoring machine can cost around $300. If radon is detected above 4.0 pCi/L it is recommended to get a radon mitigation system installed in the home. Generally this is a seller’s expense however there are no concrete rules that say a seller has to mitigate radon. If the seller will not agree to install a radon mitigation system expect to pay anywhere from $900-$1500. The installation of said system is easy enough and highly recommended for safety. It is believed that radon in a home is the potential cause of lung cancer. In fact it is the highest cause among those who have never smoked cigarettes.
- Radon in water inspection – I am giving this it’s own category because many buyers forget about testing for radon in the water or are not informed by their Realtor that it is a good idea to check. Removing radon from well water is far more costly than removing it from the air. Expect to pay $4000-$6000 removing radon from water depending on the type of system installed. There are two types of systems worth noting. One is called a radon aeration system and the other a granular activated carbon system. An aeration is the preferred method of removal but also the more costly of the two procedures.
- Mold Inspection – If the home has a history of leaks, a previously flooded basement or other moisture problems, mold testing may be in order. This can cost between $250 and $350 for a qualified inspector who deals with mold testing. Typically the home inspector you hire will visually check for mold and if he or she sees something suspicious they will generally recommend follow up with a mold specialist. Removing mold found in a home can be very costly. This is another expense that is common for the seller to remedy. Again it is not mandatory however so if you are stuck footing the bill the costs can vary tremendously based on the severity of the mold found. It is not uncommon to pay in the thousands for a medium to large mold removal.
- Lead Paint – If you have small children you may want to test for lead paint, which can cost between $200 and $400. In Massachusetts there is lead paint law in place that says in any home built before 1978 where a child resides the lead paint must be removed. You can see information on the Massachusetts lead paint law here. Lead paint removal can be costly and is something you should investigate before buying.
- Well water inspection – If the Massachusetts home you are buying is serviced by a well and not public water getting a well inspection is a very important consideration. There are two aspects to testing a well. One is the quality of the water and the other is the quantity. Obviously the potability of the water is essential but so is having enough water. A qualified inspector will take a sample of water which will be sent to a laboratory specializing in water quality. A detailed report will be generated indicating the safety in drinking the water. The cost of a well quality test can vary but plan on spending at least a few hundred dollar. The quantity test will also run around $200 as well.
- Massachusetts Title 5 – The title 5 inspection is just another name for a septic system inspection. This is cost that is born by the seller the majority of the time in a Massachusetts real estate transaction. There are certain occasions however where a buyer will need to pay this fee such as with some short sales or foreclosure purchases. If you are looking at these types of properties keep in mind there is a possibility you will be required to cover the cost. A good ball park to use would be $800-$1000.
Miscellaneous Fees and Expenditures
- Massachusetts homestead declaration – Declaring a Massachusetts homestead is an optional expense but one that is a very wise investment. A Massachusetts homestead declaration protects a homeowner for up to $500,000 of the equity in their primary residence in the event a lawsuit is brought against them. The fact that we live in a very litigious society makes this one of the cheapest forms of insurance you will find. Most attorney will charge $100-$125 to prepare and record the document. It is one of the least expensive Massachusetts home buying costs but also one of the most important!
- Home Insurance – if you are taking out a mortgage getting a homeowners insurance policy will be a mandatory requirement of the lender. Even if you are paying cash for a property it would certainly be a wise investment. Home insurance will vary greatly depending on the type of home, the town you live in and the extent of coverage you will be looking for. There are ways to save on your home insurance policy that you should certainly investigate when buying real estate.
- Moving expenses – Whether you are moving from an apartment or another home don’t forget to budget for your move. If you are going to be moving with help from family and friends that’s terrific. If not understand that hiring a moving company can be expensive. There is also a wide range of costs depending on how much you need to move. If you have a house full of furniture and other possessions plan on spending a couple thousand at least. Take a look at these moving tips to help plan in advance of your move. By planning ahead your moving day will be far less stressful.
As you can see there are a number of home buying fees in Massachusetts. Some of them are necessary while others are optional. Hopefully this will serve as a good guide for understand the costs associated with buying a home in Massachusetts. Having a grasp of not only the required closing costs when getting a loan but also the miscellaneous expenses is important. Financial surprises are never fun!
Additional Helpful Home Buying Articles
- What are some of the additional home buying expenses besides the purchase of the house via Maximum Real Estate Exposure.
- What are all the considerations for buying a home via HUD.GOV.
About the author: The above Real Estate information on home buying costs for Massachusetts was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at [email protected] or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 27+ Years.
Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!
I service Real Estate sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton and Uxbridge MA.