So you’ve finally found the perfect home that fits your budget. Let’s say your new home costs $400,000 – all you need to do now is to talk to a lender about getting a loan for this amount, right?
Not quite. Many experienced homebuyers will be quick to tell you that you’re going to need to pay more than $400,000, as buying a home comes with several hidden costs. This is very important to know, as many homebuyers who are unprepared for the hidden costs often come away with a bad experience, not to mention a huge dent in their savings.
If you’re planning on purchasing a home, here are a few hidden costs to consider:
Taxes
Although it’s pretty obvious that you’re going to be paying taxes during the buying process, most buyers are not aware that you need to prepay taxes during the closing period. If you paid less than 20% for your down payment, you’ll be required to use an escrow account, which enables your mortgage company to pay for your taxes. Without an escrow account, you’ll need to deal with property tax bills twice each year.
Home inspection fees
Most mortgage companies require a home inspection before closing, which costs several hundred dollars. There are times when an inspection is not required, but it’s always wise to consider paying a professional who will take a good look at the property, so you can avoid spending thousands of dollars and more, in case it has major problems you may not be aware of.
Survey costs
Some lenders require a professional survey of the property in order to identify precisely where the lot’s boundaries are located. These surveys typically cost several hundred dollars.
Relocation costs
In case you don’t plan on moving all of your possessions from your previous home to your new home by yourself, you’ll need to get in touch with a moving service. It sounds pretty simple, but you’ll be surprised how often buyers forget about this additional cost.
Legal fees
These costs are not exactly “hidden” – but it can be quite a shock if you aren’t exactly aware of them. Some of these legal fees include:
- Appraisal fee
- Credit report fee
- Tax service fee
- Title services and title insurance
- Lender’s origination fee
- Government recording charges
Cost of ownership
After you’ve successfully purchased a house, you’ll still need to pay for various items, such as appliances, furniture, and other new things you may need so you can completely settle in. If you’re buying a home that’s in a less-than-pristine condition, you’ll have to take into account how much you’ll need to get it into tip-top shape, which often means hiring professionals who can do the job.
Before deciding on a budget for your home purchase, it’s a good idea to always consider the additional hidden costs mentioned above, to ensure a smooth, stress-free home buying experience. And even after you’ve successfully bought the property, have an “emergency fund” ready, so you won’t have problems whenever you encounter unexpected issues.
If you need to discuss specifics and how to avoid some or all of these expenses, call me at (760) 622-5087 or e-mail me here.
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