8 Hidden Costs to Consider When Buying a House
You've decided that these near record-low interest rates aren't going to last and it's time to make that home ownership dream a reality. One thing that most first-time home buyers don't realize is that buying a house involves much more than just a down payment and a mortgage approval. In fact, there are some undisclosed costs that are either upfront or deferred that could affect your buying decision. Here are just eight hidden costs associated with buying a house that you need to add to your list and in your budget.
1. Home Inspection
The last thing that you want to do is start off in a home that has a long list of problems. When you're buying a house, once you have an accepted offer from the seller, you'll want to schedule an inspection. Expect to pay anywhere from $200 to $600 for this home inspection, and this is money that you won't get back if the deal falls through.
2. Appraisal Fee
Your mortgage lender wants to be sure that the home is worth at least as much as the value of your loan. This is why there needs to be a current appraisal on the property, for which you will pay anywhere from $250 to $600.
3. Escrow Account
When buying a house with a mortgage, the lender will want assurances that you are paying both your property taxes and your home owner's insurance premiums. For these reasons, most lenders require an escrow account through which your monthly mortgage payments are made as well as a deposit to cover these other expenses.
4. Closing Costs
Closing costs are a compilation of such things as recording fees, title insurance fees, credit report fees, tax service fees, and lender's origination fees. In all, they can amount to as much as 2% to 5% of your home purchase price.
5. Moving Costs
Unless your new home is right across the street or you have a large group of eager friends, you're probably going to need to hire some help to move. In addition to moving costs, much of your old furniture may not fit perfectly in your new place, prompting some additional expenses.
6. Repairs, Maintenance, and Upkeep
This figure can vary a great deal, depending on whether you're purchasing a new home with a home warranty or a century-old classic bungalow with "issues." Regardless of its age, all homes need basic upkeep, and some need extensive work. A Wall Street Journal study found that the cost of maintaining a typical home for 30 years is nearly four times the purchase price.
7. Homeowner's Association Fees
If you're buying a home in a certain type of development, you might face some additional expenses in the form of association fees. These fees might cover such things as a community swimming pool, grounds maintenance, and some utilities.
8. Emergency Fund Items
On top of the funds that you set aside for common repairs and upkeep, sometimes things can go wrong, and you'll be faced with costly repairs. No one hopes for a plumbing leak or to have to replace an A/C unit, but you should plan for it.
There are a lot of costs associated with buying a house that many first time home buyers don't consider. Your best strategy is to create a realistic budget so that you can both own the home of your dreams and cover your expenses. Once you have your budget, you'll be ready to search properties to find your next home.