7 Unexpected Home Buying Expenses
When you’re buying a home, it’s important to be aware of all the potential costs – not just the obvious ones. In addition to your mortgage and down payment you’ll also have to budget for additional cost, such as: insurance, inspections, and title expenses. Here are seven unexpected cost associated with buying a home. You should keep these expenses in mind when budgeting for your dream home.
1. Home Inspection
Home Inspections are covered by the buyer at the time of the service. The cost can vary depending on the size and age of the home, as well as the location. However, homeowners can expect to pay between $300 and $500 for a standard home inspection. Based on the results of the standard home inspection, you may choose to pay for additional inspections, such as for radon or termites. These additional inspections can add a cost of $100 or more. Overall, the cost of a home inspection is a small price to pay to ensure that the home is safe and structurally sound.
2. Appraisal Fees
Many home buyers are surprised to learn that they are responsible for the cost of the appraisal. The appraisal is an important part of the home loan process, as it helps to determine the amount of the loan. Typically, the property must appraise for at least the amount of the loan for it to be officially approved. The cost of an appraisal varies depending on the size and location of the property. It typically ranges from $400 to $700.
3. Mortgage Insurance
If you’re putting less than 20% down on your home, you’ll likely have to pay for mortgage insurance. It may also be referred to as Private Mortgage Insurance. This insurance protects the lender in case you default on your loan. Mortgage insurance usually costs between 0.5% and 1% of your loan amount per year, and it’s paid as part of your monthly mortgage payment.
4. Homeowners’ associations (HOAs) fees
If you’re buying a condo or a home in a planned development, you’ll likely have to pay monthly, quarterly, or yearly HOA fees. Most HOAs are managed by a professional company, but some are managed by volunteer board members. HOA fees are charged to all residents of the community. The funds are used to cover the costs of maintaining common areas of the property. The amount of the fee varies depending on the size and amenities of the community. For many people, HOAs provide an important sense of community and peace of mind. But for others, the fees can be a burden. Before moving into a community with an HOA, be sure to research the fee structure and budget to make sure it is something you can afford.
5. Title Expense
When buying a home, you’ll likely need to purchase title insurance. Title insurance protects the lender and homeowner from any financial losses that could result from challenges to the home’s title. The cost of title insurance varies depending on the value of your home, but it is typically a one-time fee paid at closing. Some lenders may require you to purchase an additional policy if you have a high-risk loan, such as a reverse mortgage. In addition to title insurance, you may also need to pay for other title services, such as a title search and expert opinion. These services help to ensure that there are no outstanding claims or liens on the property. The cost of these services can vary widely, so be sure to get several quotes before choosing a provider.
6. Property Taxes
Property taxes are levied by local governments and are based on the value of your property. The amount of property tax you will pay is determined by your local tax assessor. When you purchase a property, the amount of property tax you will owe is typically paid as a part of your closing cost. The lender will also start an escrow account to pay your property taxes for the following year on your behalf. When your property taxes are due, the lender will use the money in the escrow account to pay them.
7. Homeowners Insurance
When you buy a house, most lenders demand that you obtain homeowners insurance (hazard insurance) coverage. It protects you from financial devastation if your home is damaged or destroyed by fire, windstorm, hail, water damage, or another covered occurrence. The cost of homeowner’s insurance may range from $500 to $1,000 per year. At closing, the lender might require that the initial yearly premium be paid upfront. The following yearly payments will be paid by your lender from your escrow account, just like the property taxes mentioned above.
Buying a home is one of the most exciting—and expensive—milestones in life. First time homebuyers are often surprised about the additional cost associated with buying a house. But as any seasoned homeowner will tell you, there are plenty of hidden costs that can pop up throughout the process. By being aware of these potential costs ahead of time, you can avoid surprises down the road. Happy house hunting!
If you have any questions or would like more information, please contact me at [email protected] I would be happy to help you with all your real estate needs.
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