You’ve found the perfect home, and understand the cost of downpayment and the monthly mortgage. But most of the time, there are costs that you may not expect, especially if this is your first time buying a home. Let’s break down what those hidden costs may be…
- Inspection and Appraisal Fees: Before you purchase a home, and during your due diligence period, you have the opportunity to conduct an inspection of the home and use the inspection report to ask for any repairs to be done. While it will cost around $500 for the home inspection, it could save you thousands by simply understanding the condition of the home. The appraisal is required by the lender and usually costs around $500 as well.
- Closing Costs: While buyers can negotiate for sellers to pay the closing costs, it is typical to have to pay 2-4% of the sales price in closing costs.
- Taxes: Your property taxes are built-in to your escrow account, which you pay monthly with your mortgage, as a cost that is already factored in. But property taxes can increase, making taxes a potential hidden cost.
- Insurance: Your lender will require you to have homeowners insurance. This cost can range from $75- $200 a month and it is built in to your monthly mortgage.
- HOA and Condo Fees: If you purchase a home in a community with a Home Owners Association, you’ll be required to pay a monthly, quarterly, or yearly fee. These fees cover many different maintenance cost within the community including landscaping, club house roof, pool upkeep etc.
- Moving Costs: Boxes, moving trucks, movers, deposits to turn on your utilities, etc can really add up. Consider theses costs when buying a home.
- Utility Bills: If you’ve been renting before buying, you’ll probably find that your utilities will be more expensive. You’ll have water and electric, and possibly gas, garage collection, internet, cable and phone bill.
- Furniture and Decor: This is not a necessary expense, but if up-sizing, it will probably be one that comes up. It’s good to plan for this type of cost.
- Lawn Care: Many people hire law care services, which can be expensive. And even if you decide to handle your lawn on your own, you may still have to invest in lawn-care equipment to get the job done.
- Maintenance: Homes require a lot. And there will always be things that need attention: Air filters need to be changed, pests need to be controlled, gutters need to be cleaned out, chimneys need to be swept, and so on.
- Repairs: The most costly part of homeownership are the repairs. They are inevitable: The roof will need replacing, appliances will stop working, tiles will get cracked, trees will need to be removed, and hot water heaters will stop working. It’s just part of owning a home. Which is why it’s smart to budget 1-2% of your mortgage balance per year for these yearly maintenance and repair costs.
In the end, as long as you can afford the home, homeownership is still worthwhile. There may be cost that you weren’t aware of, but with understanding and planning, you can feel prepared to own a home and run it well!