Planning for Hidden Costs When Buying a New Home

Planning for Hidden Costs When Buying a New Home

One of the top benefits that draws people to buy a home is the fact that mortgage payments cost a lot less than rent. However, just because your mortgage payment is less expensive doesn’t necessarily mean that it’s cheaper to buy a home. There are a number of hidden costs involved when you purchase a house.

Loan Origination Fee

When you take out a mortgage, your lender will charge you a fee for the work involved with creating the loan. It’s something that must be paid upfront and can be quite large. While the exact amount varies based on the lender and the amount of your loan, most people pay between 0.5 and 1 percent of the total value of their mortgage.

Insurance

Another fee that people overlook when buying a home is purchasing insurance. You may already have renters insurance which is relatively inexpensive. However, when you buy a home, you also need to buy a lot of different insurance policies including homeowners, title, and sometimes flood insurance. These costs can add up.

Closing Costs

Be prepared to pay multiple fees when you close the sale on your new home. As soon as the seller accepts your offer, you’ll be required to pay for the legal paperwork and appraisal costs.

Moving Costs

Even if you don’t use a professional moving company, there are costs associated with moving. If you’re going from an apartment to a home with a yard, you’ll be expected to keep up with landscaping. This means you’ll need a snow shovel, lawnmower, and hose among other things.

Property Taxes

Something to keep in mind is that being a homeowner is unpredictable. You never know when a major appliance will break down or your roof will need repairing. You’ll need to keep a savings account with an emergency fund. You should also keep emergency supplies in the house such as water, food, and First Aid supplies just in case of a natural disaster.

Emergencies

Ah, yes. The taxman. Property taxes can be a huge expense and are not a flat fee every year. Instead, they vary based on a set of factors evaluated by an assessor. The assessor looks at the properties and homes in your neighborhood, how much it would cost to replace your home, and the rate you could charge if you leased the property in the local rental market. They then look at the municipality of your house and produce the property tax rate. Remember that property taxes change. If you do a major renovation, your property taxes will increase with the value of your home.

Purchasing a house can be a great investment, but don’t expect it to be cheap. Before looking for a new home, you should prepare to be hit with taxes, fees, and expenditures. If you don’t understand any of these costs, don’t be afraid to ask questions of your lender and agent, as well as doing research on your own. These professionals can give you price estimates specific to the cost of the homes you’re looking at in your area.