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Timeline and Costs of a Home Purchase (or, House Hunting Trip 4)

Posted By Jim On 05/01/2005 @ 8:38 pm In The Home | 2 Comments

Today, I went on my fourth house hunting trip and it went very well… it also resulted in my putting out a second offer on a home. Since it was the second offer, I thought I might outline the “timeline” of a home purchase – for folks who haven’t yet made the plunge and didn’t really know what to expect. It might be a little inaccurate since I haven’t actually gone through the process, but you actually set the timeline in your contract offer.

Anyway, on this trip, one of the homes I saw on my third trip dropped in price. It was originally listed at $269,900 and it fell to a mere $264,900! Count my lucky stars! This time I went back with my girlfriend and I didn’t think the place was all that – partly because I saw another place listed at $275,000 and it was far and away superior…

Onward to the little fees and the “timeline” I spoke about before. The first step in putting out an offering on a house is to simply write out a contract (it’s boilerplate with addendums for house specifics), put in a price and possible escalation clause, and then fax it off to the seller’s agent. Once you go through all the contingencies (essentially escape clauses that let you break the contract, i.e. failed home inspections), the timeline looks a little something like this.

Brief Timeline:
Ratification: This is the term for when the seller accepts your offer and it is “ratified.” The clock starts ticking the day this happens and the following timeline (which you write into the contract, but I chose what I think are standard time frames) kicks in:
Ratification+5 days – Apply for Home Loan: Within 5 days I have to show that I’ve applied for a home loan, sent in the financial documents that I’ve already done to Lending Tree.
Ratification+10 days – Home Inspection: Within 10 days I have to get a home inspection and report anything bad with the house. If it’s not done within 10 days, I’m screwed with respect to the home inspection. The Century 21 agent said they have home inspectors and that they can do it usually within 3-4 days.
Ratification+15 days – Home Appraisal: As part of the loan process, the bank will have the house appraised; this must be done within 15 days.
Ratification+30 days – Home Loan Approved: This just means I have to get the loan itself within 30 days, usually banks can do a loan within 15 days after application.

Fees? Well, there are a whole bunch of fees but only one specific to Century 21, the buyer’s agent. Apparently, there is a $195 administrative fee I didn’t know about before. It doesn’t bother me, $195 isn’t much with respect to the size of the purchase, but I didn’t know about it before so I obviously wasn’t happy to learn about it. I don’t know if that fee is considered part of “closing costs,” the nebulous “everything else fees” no one really knows how to quantify for me.

“Closing Costs”:
One part of closing costs that is quantifiable is a Maryland transfer tax, which is about 1.5% of the value of the home. In the contract, we stated that the buyer and seller would split the costs and I, as a first time Maryland homebuyer, would get a credit in the range of $725ish. As a first time buyer, I would be exempt from the State Transfer Tax (0.25%, or $725 on a $290k). With the home in Howard County, the Recordation Tax is calculated at 0.5%, the County Transfer tax is 0.5%, and I’d be subject to a lien certificate, which has a fee of $25-$55. So let’s ring of the cash register and we’ll come up with total Transfer and Recordation taxes of $2,955. And that’s not even all the closing costs… just the transfer and recording costs.

In doing a search online for closing costs, I found a site [3] with Maryland specific numbers for various “other fees.” Here is a list of what I should probably expect (if I know what was good for me):

  • Settlement Fee
  • Title Search/Abstract
  • Title Insurance
  • Power of Attorney
  • Simultaneous 2nd Trust Settlement Fee
  • Now, I don’t know if all those will apply or even if that’s an exhaustive list, but at least now I can start research that kind of stuff. Ultimately, it’s a fee I will have to pay regardless of what I do, so I should brace myself for it.

    As for the loan related fees, Lending Tree has assured me that all the fees are all spelled out and sum up to $995:

    Tax Service Fee $45.00
    Underwriting Fee $375.00
    Processing Fee $375.00
    Document Preparation Fee $175.00
    Credit Report $25.00

    Think I missed anything big?

    Anyway, as for house hunting trip 4, we saw a nice end-unit townhouse with a garage, over 2100 sq ft. of space, a nice backyard and all new applicances listed at $275,000. Offers are going to presented Monday night so I’ll find out what the verdict is probably Monday night or Tuesday morning. Wish me luck!


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    [3] site: http://www.federaltitle.com/rates_purchase.aspx

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