Buying a home has many fees and costs associated with it due to the complexity of the buying process. Since there are so many parties involves including the buyers, seller, agents, inspectors, title companies, local government etc. these costs can add up making the face value of the house seem like an illusion when the real cost of the home is calculated.

When buying a home calculating and adding in all the potential fees and costs involved should ideally be factored into the price of the home and one's offer price. This helps offset the upfront expense with a quicker accumulation of capital and/or equity in the home in addition to reducing the overall cost. This article will illustrate the many costs that are ideally considered when evaluating the cost of a home.

The amortization of a home loan can be one of the most costly parts of buying a house. It is important to determine how the interest is calculated and applied to the monthly payments over the life of the loan. Often, a large majority of the interest is front end meaning the most interest is applied to the loan during the first years of the mortgage because that is when the loan balance is highest.

Since the interest component is highest in the earliest years of the loan, less of the monthly payment will be applied to paying off the principal amount of the mortgage loan instead. To calculate a mortgage amortization involves a little math, but can also be achieved by using financial planning software and online amortization calculators.

To illustrate how amortization is calculated if a starting mortgage balance is $100,000.00 and the interest rate is annualized at 6.25% the first months interest would $6,250.00/12=$520.83 if the monthly mortgage payment is $700.00, this means only $179.17 of the capital is being paid of assuming no built in property tax and insurance payments. Each progressive month, as the principal balance of the loan is calculated, the dollar component attributable to the interest payment declines slightly and the capital payment rises slightly. Over the life of the loan, interest can add up to an amount equal to, if not greater than the actual amount of the mortgage in effect, doubling the cost of the house.

Another important cost is the down payment on a home. With federally subsidized loans and diversified loan products, the down payment amount can be as low as 5% in some cases making a home loan affordable for many income earning individuals. Calculating the down payment is simply a matter of multiplying the percentage required for down payment by the principal amount of the loan. For example, $5000 is 5% of a $100,000 mortgage.

A cost not every one may factor into buying a house are the moving expenses. Since a home will have to be moved into unless it is a rental property or capital investment property, moving expenses are worth considering. The most inexpensive moving operation is the "DIY" or "Do it Yourself" move. This type of move can cost anywhere in the range of $100-$500 depending on distance factors, packing costs, labor, and gas costs.

If a professional mover is utilized, the costs can be thousands of dollars depending on the number of hours of labor, distance traveled, truck space used and insurance costs. There are also several other intermediate options such as self packing and professional delivery of items, or self-managed hiring of labor and moving.

Settlement fees are added expenses to the home buying process. These fees are often divided between the buyer and seller of the home and include negotiated repair costs, city and county taxes, assessment costs, recording fees, title insurance fees, closing fees, etc. It's sometimes easy to overlook settlement costs in the home buying process because they are small in comparison to the size of the mortgage loan. However they do add up and can add a few hundred to a few thousand dollars to the actual cost of buying a home. Some of these costs may be part of a re-negotiation of the sales contract in which case repair costs may be paid for by the seller.

When buying a home it is often prudent to hire one or more inspectors to assess the quality and safety of the home being purchased. Inspectors may include pest inspectors and property inspectors, and their fees are typically between $100-500 per inspection. If the inspectors perform added services requiring extra time and analysis, they may add a premium or add on fee to their existing fee. Examples of add on services may include radon analysis, lead testing and ground saturation tests.

Administrative and processing fees are also dubbed by some as "junk fees" because they are believed to be unjustified added expenses to the settlement costs. These fees are something that can be minimized by carefully choosing a mortgage lender and manager that have standards and restrictions regarding what fees can be charged in processing the loan. Administrative and processing fees can be considered settlement costs but are also somewhat discretionary making them a variable and add on cost to standard settlement costs.

In some cases an attorney's presence may be requested in connection with the purchase of a home to oversee and advise on the contract details. This may be a worthwhile expense if one is not sure about the terms of the loan contact and can provide a protection that could pay off years into the life of the mortgage. Legal expenses vary between hourly rates charged by attorney's and how involved in the mortgage process the attorney becomes. Fees may range from a few hundred to thousand dollars depending on the complexity of the real estate transaction and time involved working on it.

Calculating home buying costs involves breaking down the sum of fees, expenses and commissions required for a home exchange transaction to take place and then applying those costs to the total home cost. These expenses can amount to a few percentage points of the face value of the home, not including mortgage interest payments over the life of the loan. All fees, commissions and expenses are ideally factored into the selling price, contracts and negotiation of the home price and costs. Careful consideration of home buying costs in addition to a well chosen home, mortgage pay off strategy and mortgage loan provider can minimize home buying costs significantly.