Don't Forget These Costs When Buying a Home
You’ve crunched the mortgage calculators, estimated your tax payments,
and taken a realistic look at how much house you can afford. You’ve
stuck within your range when scouring the realtor.com® listings, being
careful not to bust your budget.
But there are more expenses involved in home buying than just the
property costs. And those additional payments, if you don’t factor them
in, can be high enough to derail your conscientious planning.
Here’s what to keep in mind:
Buying Costs
You’ve got your mortgage pre-approved, but that’s not all you will need
to fork over to get the keys to your new place. Services that need
paying:
- Your buyer’s agent fee
- An appraisal to confirm a reasonable market price for the property
- Inspections of structural, mechanical, pest or other potential issues
- A real estate attorney to review all contracts (depending on the state)
Property taxes vary widely, up to 4.2% of a home’s value in some states, according to a
CNN map
published in 2013. Depending on when you buy, you may owe the previous
owners for property taxes they have already paid. You may also need to
pay fees to a local association, such as a condo homeowner’s
association.
Moving Costs
Moving into a home can involve major expenses for packing, storing and
transporting your possessions and yourself. If you are moving across the
country, the costs could be significant. Even moving across town can
cost more than you planned for truck rental, movers and equipment.
Utilities
Setting up your telephone, electricity, gas and water—did you budget for
these expenses? They could cost more at your new place, especially if you’re moving to a larger home or from a rental.
New Stuff
You may need to purchase appliances or furniture for your new home. Some
items, like your old particle board bookshelves, may not be worth the
cost of moving. Again, if you are sizing up, you face the potentially
fun, but possibly financially draining, challenge of filling the new
place.
Maintenance and Renovations
Trees fall on roofs. Gutters need cleaning. Driveways need repair…. A
standard rule of thumb is to budget at least 1% of your home’s purchase
price each year for home maintenance costs.
Maintenance can include things such as painting, replacing roof
shingles, fixing or upgrading plumbing and wiring. The amount you will
need to pay for maintenance can depend on the age of the home, the
previous owners’ upkeep and the climate.
Homeowner’s Insurance
You won’t be able to obtain a mortgage without homeowner’s insurance
covering both the property and its contents. However, the standard
insurance may not cover natural disasters such as floods, tornadoes and
earthquakes. Depending on where you live, you may want to consider
taking out additional insurance to cover such risks.
Private Mortgage Insurance and Title Insurance
If the down payment on your home was less than 20% of the purchase price, you will have to pay for
Private Mortgage Insurance. PMI protects your lender in case you default. It’s standard, and
fees vary.
The rules are complicated, but usually once you have paid down the
mortgage so you owe less than 78% of the purchase price, you can drop
the PMI payments.
Title insurance
offers protection for you (and your lender) if you later discover that
someone else could lay claim to the title, and therefore ownership, of
the house.
Even if you are lucky enough to avoid paying for PMI, you find a
low-cost attorney you can trust, and you have a modern, energy-efficient
house, these expenses can still add up to thousands of dollars. That
prospect should not scare you away from homeownership, but it always
helps to be prepared.
