Costs That Go Into Buying A Home
– All too often we get so caught up in the excitement that goes into buying a home that we forget to budget for other items that go into the costs that go into buying a home. Sure, when you are shopping for a home you are most concerned about what the asking price is and what kind of ‘deal’ you think you can get. But, let’s not put the cart before the horse and forget about other potential expenses that could go into the purchase of a home. In many cases, having a down payment is not the only money that you will need for the purchase of a home. In addition to the down payment, you will also be expected to pay out of pocket expenses for the following items:
This averages around a few hundred dollars and, even if your lender doesn’t require a home inspection, it may still be worth piece of mind to pay the few hundred dollars to have a licensed professional look over the home. The home inspector will review the home from top to bottom to ensure that there are no hidden issues that could arise in the future and be costly to repair.
Make sure that you are educated on the amount of annual property taxes that are associated with the home. Most of the time taxes may have to be prepaid upon closing.
Please understand how the escrow process works and if you have an escrow account set up in order to pay property ownership expenses such as property taxes. An escrow account is mandatory if less than 20 percent down payment is used. Each month, you will pay more to your mortgage holder than your mortgage payment as the additional funds will be put into an escrow account which will allow your mortgage company to pay property tax bills on your behalf. Homeowner’s insurance, as well as homeowner’s association dues, can also be paid through an escrow account.
Private Mortgage Insurance
In the case that you do not put a 20 percent down payment down for the purchase of the property, then you will be required to pay Private Mortgage Insurance (also known as PMI). Depending on lender requirements, it will either be rolled into your monthly payment or required to be paid up for one year in advance.
As simple as this may seem, many new homeowners neglect to factor this into the purchase of a new home. Whether you are hiring movers or doing it yourself, some expenses will be accumulated through the rental of a truck, purchase of boxes and other moving supplies, etc.
Setting up Utilities
If you haven’t been a previous customer of a utility company then they may want you to put down an initial deposit to set up service.
Other fees that could add up in a hurry when you are purchasing a home include, but are not limited to the following: appraisal fee, credit report fee and loan origination costs. Pre-paid interest, recording fees and homeowner’s association transfer fees are all potential additional expenses that could be incurred. In some cases, closing costs can be rolled into the loan and some deals are structured so that the seller is asked to pay a specific portion of the buyer’s closing costs.
The purchase of a home is a large financial commitment. Not one to easily be decided without researching the additional costs that go into the initial purchase and then home ownership costs once you own the home. Don’t let this information scare you as there are potential ways to reduce them. Contact us to learn more about purchasing the home of your dreams.
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