First-time homebuyers often check on the price tags of a house. In terms of immediate expenses, the top three considerations that homebuyers will often have are the maximum price that they can pay for a property, the down payment they can offer, and the monthly mortgage, if they plan to finance the purchase. They will tend to forget some factors in the possible cost of owning a house. Some of these costs are obvious, such as property taxes and insurance, but there are also some hidden costs that they may not be aware of. So, before saying yes to a dream house, Hummel Group wants to ensure that homebuyers are financially prepared for the true cost of homeownership. Here’s a checklist of the most common costs to consider when purchasing a home.
Home inspection may cause a dent in a buyer’s budget, but it is worth the cost in the long run. Getting a professional, certified home inspector will ensure that there will be no unforeseen issues in the home. This includes checking the foundation, walls, ceilings, flooring, windows, electrical, water, plumbing, and every root and branch of the house. If the inspection identifies flaws with the property, you can bargain with the seller to get them fixed or to reduce the sale price.
An appraisal fee is the payment for a certified appraiser to estimate the value of a home. This is to protect the interest of the mortgage company and homebuyer (and other instances).
Banks and other mortgage lenders will not consider offering a loan or financial assistance without an appraisal. As for homebuyers, having a higher home value estimate will give them more equity than expected, while having a lower estimated value will give them a chance to re-negotiate the price of the property, provided that the contract is contingent on an appraisal.
Earnest money is given after the seller accepts your offer to purchase a home. It serves as a good-faith deposit, proving your commitment to upholding the terms of the selling agreement, and ultimately buying the property. Although it is customary to put down at least 1% of the purchase price as earnest money, there is no law that requires it. Earnest money is usually non-refundable if you choose to back out from a deal. In certain cases, potential buyers will submit even bigger deposits in an effort to sway sellers.
These are the costs incurred when a property is transferred from a seller to a buyer. This is the next stage where the loan is approved, the home has passed inspection, and it is set to receive the keys at closing. First loan estimate gives a ballpark figure for the total closing cost, but it won’t be official until the closing time. Closing costs include the following:
Escrow accounts have two functions: Holding earnest money, and sending payments for a homeowners’ insurance and real estate taxes. The earnest money is used at closing to reduce the buying price. However, the money will be returned to you if the house has a problem that was discovered during the inspection. Lenders may require extra funds to be kept on the escrow account to cover unforeseen costs.
Title fees, or title insurance, is not mandatory, but it is necessary to protect the homebuyer and lender from possible issues with the property’s deed, once ownership is assumed. Otherwise, the buyer is responsible for covering any legal fees for an unclear title, or if any defect is found in the title.
Transfer tax, also known as deed transfer tax, is a one-time fee for the transfer of the property’s title or deed. The amount, which is typically a percentage of the home’s sale price, is set by the state or municipality where the property is located.
Moving costs come in once a deal is successfully completed. This includes expenses for the moving company or moving truck, packing supplies, and storage payment if the homebuyer (now the homeowner) cannot move to the property right away. It is also important to factor in the cost of the furniture that you will need for the new home.
Bottom Line on Hidden Home Costs
Buying a home is one of the biggest events in one’s life. Being familiar with the less-than-obvious costs will clear the pathway to their new home. Start setting aside a decent amount to prepare for these unexpected costs associated with purchasing a property. Divide savings, whatever they may be, into manageable amounts.
Some of the aforementioned expenses can be included in the mortgage payment, and some can be taken care of with your savings. In any case, it could really mess up one’s budget, especially during the first year of living in the new house, so ensure finances are in good shape to handle the financial responsibilities that come with owning a home. It is also important to note that Realtors can greatly help with the process.