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First time homebuyer
Hidden Fees to be Aware of When Purchasing a Home
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.
In Conclusion:
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.
Thank you for reading! I hope this was helpful.
4 Tips for a Successful House Hunt!
4 Tips for a Successful House Hunt!
Hunting for a new home online is a great place to start your search, but it should not be your end all be all. Good listing agents are excellent at highlighting the best features of the home, but keep in mind there may be more than meets the eye. To make the most of your time and efforts and gather a well-rounded picture of home listings online, keep the following three things in mind.
- Stay up to date. When you start your search, make sure you find a site that pulls up-to-date listings directly from the multiple listing service (MLS). This is where real estate agents actively post their most current homes for sale. Many online resources update less often or fail to remove listings that are off the market, making it more difficult to sort through the clutter.
- Stay within your budget: It’s tempting to look at homes over your budget however doing so, may create unrealistic expectations. It creates a desire for the items in the home that was priced higher but without the higher price tag. This may lead to disappointed with the homes that are within their budget. As a result, it often extends the home search process or causes the buyer to stretch their budget too thin.
- Pictures can be deceiving. Real estate photographers are experts at showing a home in the best possible light. Many use tools and strategies to boost appeal, such as a fisheye lens to make areas look larger and creative editing to make colors and textures really pop. But, often listings will not contain photos of unappealing parts of the home, like small closets or outdated bathrooms.
- See it to believe it. Once you find what appears to be your dream home online, call up your real estate agent and schedule a showing. You want to take the opportunity to vet the home in person and explore every part of it before beginning the offer process. Your real estate agent will help you cover all your bases and will ask questions you may not have thought of.
4 Mistakes That Could Delay Lender Approval
Avoid these 4 Mistakes When Buying a Home
It’s no secret that buying a home can be a complicated process. Unfortunately, many first-time buyers make costly mistakes in the loan process that delay or even torpedo their loan approval. Here are four of the most common mistakes to avoid if you want to make your mortgage process as smooth as possible.
Not including all relevant information in your financial profile.
One mistake that many first-time homebuyers make is failing to include all relevant information in their financial profile. Lenders will want to see a complete picture of your finances, including your income, debts, and assets. Leaving out any key information could lead to a delay in your loan approval.
It’s important to be completely honest with your lender about your financial situation. Lenders need to know everything to make an informed decision about whether or not to approve your loan. If you’re not truthful, you could end up being denied the loan.
Assuming pre-approval is equal to actual approval.
The second mistake that could delay a first-time homebuyer’s loan approval or even cause a denial is assuming that the pre-approval is final. The pre-approval for a mortgage means that you talked to a potential lender or maybe even provided some documentation that gave the impression that you will be approved for a certain amount. Don’t be confused – this is not an actual approval. To obtain the final loan approval, your file will be reviewed by an Underwriter. When you are “underwriting approved†you will be able to get final loan approval.
Items the underwriter will review.
Employment History: First-time homebuyers may not have a long employment history to show. Lenders like to see at least 2 years of consistent employment. If you have had any gaps in employment, be prepared to explain them.
Income: Be prepared to provide the documentation to the underwriter. They will request your most recent pay stubs, W2 and/or tax returns. The underwriter will want to verify that your income is sufficient to cover the new mortgage payment.
Assets: You will need to provide bank statements for the past few months to verify that you have the funds necessary for the down payment and closing costs. The underwriter will also look at your debt-to-income ratio to determine if you can afford the new mortgage payment.
Credit Score: Your credit score is one of the most important factors in determining whether or not you will be approved for a loan. Avoid making any major purchases and/or obtaining any new credit lines during this process.
Not providing all the required documentation.
Another mistake that could delay lender approval is not providing all of the required documentation. When you apply for a loan, the lender will request a variety of documents. If you don’t provide all of the requested documentation, the lender won’t be able to approve your loan.
Your lender may request the following documentation:
In addition to the documentation mentioned above, You will be responsible for ensuring the underwriters knows where funds for the down payment and closing cost are coming from. Do not move money around to different accounts or receive large deposits from friends or family. A good documentation trail helps during the mortgage approval process.
Not only do you need to provide all of the requested documentation. Remember that time is of the essence. To ensure all deadlines are met, provide the requested documentation to the Lender as soon as possible.
Not knowing enough about mortgage rates.
Not understanding how interest rates work is the fourth mistake that many first-time homebuyers make. The lender cannot lock your interest rate until you have an accepted offer. Until then, if interest rates increase, it could jeopardize the pre-approval. Let’s discuss why that’s the case. When interest rates climb, the buyer’s borrowing capacity decreases. For example, A buyer pre-approved to purchase a home for $350,000 at a 3% interest rate, could only be approved for $275,000 at 5%. As you can see, that’s a major difference in the approval amount.
In Conclusion:
First-time homebuyers need to be aware of a few potential mistakes that could delay lender approval. These include: not being honest on the loan application, providing insufficient documentation, not knowing enough about mortgage rates, and making large deposits during the loan process. By avoiding these mistakes, you will be well on your way to successful mortgage approval.
What You Shouldn’t Sweat When Finding a Home
Top 5 Things to Look for When Touring a House
Buying your first home can be overwhelming – the fear of making the wrong choice is real. The process is filled with uncertainties and doubts, especially when touring potential homes. Don’t fall into the trap of judging a house by its exterior; it’s what’s inside that truly matters. This blog is your guide to avoiding the heartache of picking the wrong house, ensuring you make the right decision for your future. Here are some specific areas you should pay close attention to:
Focus on the Floor Plan:
When you’re touring a potential new home, it’s easy to get caught up in the seller’s personal decor or how the rooms are currently being used. However, try to look beyond that and focus on the layout of the house.
Ask yourself these questions:
- Does the flow of the rooms make sense to me?
- Can I envision myself living comfortably in this space?
- Is there enough space for my furniture and belongings?
- If I have a family, is the layout conducive to my lifestyle?
Take note of any potential obstacles or limitations in terms of functionality and flow. The floor plan is an essential aspect to consider when looking at homes because it will ultimately determine how you live in the space.
Look Beyond Cosmetic Fixes:
A weird carpet color or a quirky wallpaper shouldn’t be a deal-breaker. These are easy (and often cheap) to replace compared to structural issues. When it comes to looking beyond cosmetic fixes, it’s important to focus on the structural and functional aspects of the home that might not be as easily changed or could require a significant investment to update. Here are some specific areas you should pay close attention to:
- Roof Condition: Check for signs of aging or damage, as replacing a roof can be expensive. Ask about the age of the roof and when it was last replaced or repaired.
- Foundation Integrity: Look for cracks or signs of water damage in the basement or around the house’s foundation, indicating potential structural issues.
- Heating and Cooling Systems: Understand the age and condition of the furnace, air conditioner, or any other heating or cooling systems. Replacing these can be costly.
- Plumbing and Electrical Systems: Ensure that the plumbing and electrical systems are up to code. Look out for outdated systems that could require a complete overhaul.
- Windows and Doors: Check for drafts, leaks, or signs of poor insulation. Replacing windows and doors can also be an unexpected expense.
By focusing on these elements, you can better assess the condition of the home and the any potential costs you might incur beyond just the purchase price.
Assessing the Location:
When you’re looking at a house, remember that you can’t change its location. Check out the neighborhood, nearby facilities, commute times, and noise levels. Visit different times of the day to really understand the community.
How Important is the Neighborhood?
Finding the perfect house is not just about the building itself; it’s also about picking a neighborhood that suits you and your family. A great home might not feel right if it’s in a neighborhood that doesn’t match your lifestyle or future plans.
Things to Think About When Checking the Location:
- Safety: Look into local crime rates and chat with neighbors to know how safe the area is.
- Schools: If you have kids, good schools nearby might be crucial. Even if you don’t, homes in good school districts usually have better resale value.
- Nearby Services: Consider your daily commute and how close you are to places like stores, hospitals, and parks. Being far from essentials can impact your quality of life.
- Community Vibes: Every area has its own feel. Ensure it matches your personality and lifestyle.
- Noise and Traffic: Visit at different times to understand traffic and noise levels. A quiet street on weekdays might be noisy on weekends.
Getting the Right House in the Right Neighborhood:
Remember, you can change almost anything about a house, but not its location. Getting a house that fits your needs but is in the wrong neighborhood can lead to disappointment. Imagine buying your dream home only to be kept up by noisy neighbors or facing a long commute. These are daily issues that can affect how happy you are with your home.
In short, give the neighborhood the same attention as the house. Your home is more than just walls, and the right neighborhood can make a big difference in your life.
Consider Potential Future Growth:
You’ve covered the basics like the floor plan and roof, checked the neighborhood, but here’s more! Consider the future. Can this house grow with your changing life? Maybe it’s just you or you and your partner now, but what if your family expands or you get new hobbies that need space?
Affordable Future-Ready Home Tips:
- Planning Ahead: Look for a house with room to expand, like extra space for future needs or converting areas for different uses.
- Smart Flexibility: Opt for a place that allows for easy modifications, such as creating an open living space as your lifestyle evolves.
Choosing a home that fits these criteria is a wise investment. It lets you stay put and avoid the stress of moving just for more space. Enhancing your home can also boost its value – a practical choice for the long run.
When searching for your first home, consider affordability alongside future potential. Find a place that can adapt and grow with you, ensuring future plans are within reach.
Final thoughts:
When touring homes, it’s important to look beyond the superficial and focus on what truly matters. Be observant, ask questions, and always trust your instincts. Remember, no home will be perfect, but it should feel perfect for you.
