by Fredrick Obura

Cynthia Dzila is a 25-year-old human rights activist based at the coastal city of Mombasa.

Two years ago she secured a home loan to buy a 12-bedroomed house in Nyali Estate.

This, she consider as a worthwhile venture because there will be no more monthly budget on rent. However, as she confirms, buying a house for the first time can be exciting and scary.

Mr Salim Mohamed, a private property developer, notes that choosing a mortgage should be done with care since what appears a good deal may turn out to be expensive in the long-term than you would imagine.

Says Cynthia: "Buying a home of your dream can be full of hidden costs. Most of the costs involved like insurance, stamp duty, valuation and legal fees are unavoidable and this is where one needs to secure enough funds".

Being aware of all hidden costs will help one to not only make the whole process a lot less frightening, but will also allow one to manage budget better and save some little money.

Protestors in Michigan. If you are aware of the hidden cost in a mortgage, be ready for auctioneers. PHOTO:COURTESY]

Experts agree that getting a mortgage encompasses more costs than just the monthly payment.

Take for example, after you sign the sales contract, a series of tasks occur by various people involved in the home purchasing process.

"These people are compensated through what is known as closing costs. The fees that make up the closing costs pay each of the resources completing specific tasks once the loan is closed," Cynthia says.

"If you are dealing with a direct lender, such as Housing and Finance Corporation or Savings and Loans (S&L), the lender’s good-faith estimate must reveal all loan charges. But you might be asked to pay legitimate fees to third parties, for instance appraisal, and lender’s title insurance among others," Mohammed says.

However, if you are dealing with a mortgage broker, his or her written good-faith estimate might be less reliable.

"Watch out for previously undisclosed fees with such creative names as underwriting fee, document preparation fee, and loan review fee, warehousing fee and loan origination fee," he says.

The fees associated with the closing costs can be negotiated. Lenders must provide you with an estimate of the fees you will be required to pay within three days of receipt of your application.

"Once you receive the list of fees, you can negotiate with the lender to reduce or eliminate some of the fees. Buyers should negotiate to have the seller pay some of the closing costs," he advises.

Closing cost fees are associated with three major tasks in the home buying process: the cost of getting the loan, the property’s transfer of ownership, and state and local government taxes. Here are some of the costs you can expect to be included in the closing costs:

Some lenders provide a valuation free of charge. The valuation will normally entail a quick visit by the lender’s surveyor to check the property is not being sold at a vastly inflated price, and that there are no obvious structural problems.

These will include Land Registry and local authority searches, and for leasehold properties, an examination of the lease to find out about service charge or any other special conditions.

Once your offer has been accepted, you need to find a good solicitor.

As notes Cynthia the cost of hiring a legal expert is often a slow process and many first-time purchasers worry they will lose the property through hold ups.

"It’s always best to get one through personal recommendation, but if this is not possible, obtain at least three quotes before making your choice," she says.

"If an all in one fee is quoted, make sure this includes letters and postage, search fees, bank transfer fees, Land Registry fees and VAT," says Mohammed.

"There is one golden rule here, a buyer should not automatically buy through the lender," he says.

Mortgage lenders make big commissions on buildings and contents cover and although these have reduced substantially in recent years, you can probably by the same cover for less elsewhere.

It is not illegal for lenders to insist that borrowers buy their insurance as part of the mortgage deal. It may be worth shopping around for another lender if you do not want to be tied in to a particular insurance company.