You've decided to purchase a Northern Virginia home.  You have made sure your credit is good so you can get the best interest rate possible.  You have saved up enough money to make a downpayment.  You've found a Virginia REALTOR® you're happy with.  You've looked over your budget and know exactly how much of a mortgage payment you can afford.  But, getting approved for your home mortgage is only the first financial step in your homeownership journey.  You will need more money than just your downpayment before you can own your dream Northern Virginia home.

Closing costs are the additional expenses that come with purchasing a home.  Here is what you can expect with closing costs:

Private Mortgage Insurance Requirement - Banks require all homeowners who have borrowed more than 80% of their home's purchase price to buy Private Mortgage Insurance (PMI).  That means that, if you put less than 20% down when buying your Northern Virginia home, you will have to purchase PMI.  The PMI is meant to protect the lender in case you default on your loan, an issue that is a major concern in today's economic climate.

Appraisal of Your Home - Another item that lenders require borrowers to pay for is an appraisal.  The purpose of an appraisal is to make sure that the Northern Virginia home that the bank is lending you money for is actually worth the amount being borrowed.  If the seller is asking $300,000 for the home but the appraisal comes back saying that the home is only worth $280,000, the bank will not let you borrow more than $280,000.  That means that, if you really want to purchase that Virginia home, you will have to come up with the other $20,000 yourself.  That is in addition to the downpayment you are using on the $280,000 the bank is willing to lend you.  The positive side of an appraisal is that it may give you some leverage in negotiations to know the real market value of the home. 

Your Home Inspection - Every homebuyer should get a home inspection, even if you are buying a brand new home from a builder.  The age of a home doesn't make it immune to problems like termites and mold.  Speak to your Virginia REALTOR® to make sure your offer comes with a clause that will allow you to back out of a home purchase if negative information comes back on a home inspection.

Paying Points - Think of points as prepaying your interest.  When you purchase "points" on a loan, you are paying an upfront fee to lower your interest rate.  Every point is worth 1/8%.  That may not sound like much, but it can add up to thousands of dollars in savings over the life of your loan.

Origination Fees - Writing up and processing the paperwork on a loan costs money.  Lenders pass this cost along to the consumer in the form of an origination fee.  These can vary from lender to lender.  So, definitely shop around.

As you can see, the money it takes to buy a Northern Virginia property does not stop at the downpayment and mortgage payment.  Hopefully, this guide has taught you what to expect with closing costs.  If you ever have any questions about closing costs, the buying process or anything else related to real estate in Northern Virginia or South Carolina, please don't hesitate to contact me. 

Gene Mock, your Northern Virginia and South Carolina real estate specialist