Buying a home is not like buying a TV at Best Buy. When a consumer wants to buy a TV at Best Buy they will go down to the local store, a sales rep will most likely help them, they will choose the right size and style on the spot, they most likely will have the cash for the purchase or if not they can fill out a simple form, pen a best buy credit card, and pay what they do not have in capitol as best buy credit. Best Buy deals offer no interest for months and hopefully the consumer can pay off the TV buy the time the interest starts. Buying a home is a complex and complicated process. Buying a home takes a plan and pre-knowledge of what the buyer is really in the market for. Buying a home takes the assistance of an experienced realtor and financial institutions and dealing with the previous owner and so on. Most importantly, unlike a TV almost no buyers have the capitol on hand to purchase the home without some debt. So the true cost of a home is much much more than just the purchasing price, the cost of a home is the cost of financing on top of the price of the actual property. The cost of financing includes closing costs, loan discount points, and prepaid items.

Closing costs are the highest and most unavoidable costs of financing. Closing costs may be anywhere from two to eight percent of the entire cost of the home. Closing costs more simply defined are the costs that originate with the lender in creating a new loan for a home. The first closing costs come from the initial application of a loan by the simple costs of a credit check. The second closing costs are charged from the inspector who will inspect the home and do an appraisal, or a assessment of the worth of the property. The most prominent closing cost is to actually pay the loan officer through a fee called a loan origination fee. The actual list of closing costs is long. They also include up front insurance, taxes, and other fees that are minor do again do add up to a considerable amount or sum of the actual cost of the entire home. Which is a lot considering that homes are one of the most expensive things most buyers will ever attempt to own in their lifetime.

The second cost associated with financing a home is a cost that is dealing with the actual price charged from a lender for lending their money. Interest is a an actual form of payment to the lender for their offer of lending a loan. The higher the interest rate, the more money the lender will make if the loan is re-payed. So, a home buyer might find it in their interest to pay less interest over time by paying it up front. A lender will give the buyer an option to pay an interest point by some nominal fee. For example a lender might charge the borrower one thousand dollars to bring the interest down from eight to seven percent.

The final cost of taking out a loan are the prepaid items. A great example of a prepaid item is buying a car. Almost everyone who buys a new car from a car dealership will prepay for an extended warranty guaranteeing that if the car has serious issues the dealership will fix it at no extra charge. A home owner will want to prepay for possible disasters like a faulty foundation, or bad electrical, or poor plumbing etc. and will want to pay this before they move into the home allowing the payments to be part of a “warranty.”

Author Bio: This article is brought to you by Our Best Real Estate, a website featuring Fountain Hills AZ homes for sale. Other features include Tempe AZ homes, Mesa Real Estate, and Scottsdale AZ homes for sale.

Category: Real Estate
Keywords: homes, real estate, buying a home, selling a home, realtor, realtors, loan, mortgage, foreclosure, s