Most buyers underestimate the costs of buying a home. It’s important to consider all the costs involved beyond the purchase price. While many first-time home buyers diligently save for the down payment, there are several hidden costs that can catch them off guard. In this blog post, we’ll shed light on nine often overlooked costs when buying a home. By being aware of these hidden expenses, you can better prepare your budget and ensure a smooth transition into homeownership.
Property Taxes
Property taxes can significantly impact your monthly payment. Taxes when it comes to properties are assessed at the local and state level. Before buying familiarize yourself with the state’s property tax rate. Then research the property tax rates in the specific counties or zip codes of your home search. Your Savvy Mortgage Expert will need these details to give you an accurate idea of how taxes will impact your monthly payment.
Homeowners Association (HOA) Fees
If you’re thinking about a home in a community with an HOA, be prepared for monthly or annual fees. These fees cover amenities, maintenance, and communal services. Review the HOA documents to understand the fee structure and any potential increases in the future.
Private Mortgage Insurance (PMI)
If your down payment is less than 20% of the home’s purchase price, your lender may require you to pay PMI. This additional cost protects the lender in case of default. It’s important to factor in this expense when calculating your monthly mortgage payments.
Home Inspection Costs
While a home inspection is a crucial step in the buying process, it comes with a cost. Hiring a professional inspector can range from a few hundred to a few thousand dollars, depending on the size and complexity of the property. Remember, investing in a thorough inspection can save you from expensive surprises later on. Home inspections are the best way to uncover problems with the house that would otherwise be unknown to the buyer. Do not scrimp at this cost. It will protect you from future expenses.
Closing Costs
Both buyers and sellers have closing costs when buying a home. While the seller’s closing costs are typically paid out of the proceeds from the sale of the home. Buyers have 4 ways to pay theirs. One, they can pay cash out of pocket. Two, negotiating a seller credit into their home purchase contract to have seller proceeds pay a portion of their closing costs. Three, secure a lender credit, which sometimes increases the mortgage interest rate. Four, downpayment assistance programs often allow funds to be applied to buyer closing costs.
Buyer closing costs encompass various fees, including appraisal fees, title search fees, attorney fees, and more.
These costs typically range from 2% to 5% of the home’s purchase price. Before closing, request a breakdown of the anticipated closing costs from your lender or real estate agent to avoid any surprises.
Home Insurance
Homeowners insurance is a necessity to protect your investment. Premiums can vary based on factors such as the home’s location, value, and coverage you choose. Research insurance providers and obtain quotes to estimate the ongoing cost of insuring your new home.
Moving Expenses
Don’t overlook the expenses associated with moving. Whether hiring professional movers or renting a moving truck, these costs can add up quickly. Factor in packing supplies, transportation, and any storage fees if needed.
House Hold Appliances
Household appliances, like water heaters, dryers, and refrigerators, have finite lifespans due to wear and tear over time. Regular replacement is essential not only to maintain their efficiency but also to ensure safety. Neglecting the replacement of aging appliances could lead to reduced performance, increased energy consumption, and potential safety hazards, underlining the importance of staying mindful of their natural life spans.
Maintenance and Repairs
Owning a home means taking care of ongoing maintenance and repairs. From routine maintenance tasks to unexpected repairs, allocate a portion of your budget for these expenses. Having a contingency fund will help you handle these costs without financial strain. Check out our Homeowner’s Guide for more home maintenance tips.
Utilities and Home Services
When moving into a new home, remember to account for utility costs such as electricity, water, gas, and internet. Additionally, consider expenses related to home services like pest control, landscaping, and garbage removal.
As a first-time homebuyer, being aware of these hidden costs is crucial for planning and budgeting effectively. By considering expenses beyond the purchase price, such as property taxes, HOA fees, and home maintenance, you can make informed financial decisions and avoid unwelcome surprises. Remember, careful planning and due diligence will help you navigate the home buying process with confidence and enjoy the benefits of homeownership for years to come.