The Often Forgotten Costs Associated With Buying A Home

Posted by Trent Corbin on Wednesday, August 15th, 2018 at 3:12pm.

Leave some extra money in your budget–you’ll probably need it

This probably won’t come as a shock, but buying a home is expensive. You have mortgage payments, appraisal fees, property taxes, homeowners insurance–and that’s all on top of the actual cost of the house. It can take years to save up enough money to finally purchase your dream home. The last thing you want is to spend your entire budget having completely forgotten about some of the less obvious payments you’ll have to make.

That’s where we come in. We’ve put together a list of the often forgotten costs associated with buying a home to better help you budget. Whether you’re a first-time buyer or in need of some home buying reminders, make sure you don’t forget any of these costs.

Closing Costs

The “closing process” begins when the home’s seller takes you up on your purchase offer. The period between then and the actual closing date typically lasts between 30 to 60 days, during which the sale/purchase of your home is “pending,” or if you make a substantial deposit into an escrow account the period can be considered “in escrow”.

Along with the closing process comes a major payment toward your new home. Closing costs are fees paid to lenders and third parties at the close of a real estate transaction. On average, these costs can range from 2% to 5% of your home’s purchase price and include one-time fees such as:

  • Appraisal fees

  • Survey fees

  • Wire transfer fees

  • Underwriting and origination fees

  • Document prep fees

  • Discount points

  • Credit report fees

  • Title insurances fees

  • Recording fees

You can put some money aside for these costs in your budget, but you won’t know exactly what these costs will be until you get a Good Faith Estimate (GFE) from your lender after applying for your mortgage.

Read for more on what to expect during the closing process.

Home Inspection Fees

A home inspection is strongly advised whether the house is an old fixer-upper or recently built. Not only will an inspection boost your confidence in the condition of the property, it can also save you stress and hundreds of dollars in repair costs.

Inspectors will check for things like:

  • Water damage

  • Faulty wiring

  • Poor drainage

  • Roof problems

  • Structural damage

  • Plumbing issues

  • Inadequate ventilation and insulation

  • Defective HVAC

If you choose to hire an inspector, you should do so soon after the seller accepts your offer so that any repairs needing to be made have plenty of time to be done. Home inspections are not required but are encouraged when buying a home, so it’s a good idea to leave room for one in your budget.

Homeowners’ Association Fees

When you purchase a property in a planned development, such as a leased land property or a gated community, oftentimes you will be required to join that community’s homeowners’ association. This membership comes with monthly or annual HOA fees for the upkeep of common areas and buildings. HOA fees help maintain the quality of life for its members and protect property value for owners and usually range from $200 to $400 a month.

Because HOA fees differ for each community, it’s important to know the fees specific to yours. When considering buying a home in a community that has an HOA, ask the following questions:

  • Are HOA payments monthly or annually?

  • What do the dues cover? Are things such as garbage pick-up and cable included?

  • How are HOA fee increases set? How often do they occur?

  • How large is the HOA’s reserve fund?

  • Are there any building or renovation plans that will affect the fees in the future?

HOAs can be great for keeping the value of your property up or getting things like clubhouses, fitness rooms or sidewalks maintained or fixed, but they do require a good bit of money. If you plan on buying a home in a community with an HOA, make sure to know all of the costs associated with it.

Utilities

The cost of utilities will vary depending on the size of the home and how much of each is used. The essential utilities you’ll have to pay for include water, electricity and gas. Additional utilities you might choose to include are cable, phone, internet and trash services. Utility costs can be anywhere from $200 to $600 a month or more. Ask your real estate agent for an estimate on the home’s monthly utility costs to make sure it’s within your budget.

Buying a home is really exciting, but also a huge financial endeavor. Carefully consider all of the costs associated with your buy before you decide to make the big purchase.  

Download our Free First-Time Home-Buying Guide: Top Questions Your Realtor Will Ask for more great tips on home buying. What are you waiting for? Get yours today.

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