Buying a home is an exciting life step and a huge investment—there’s no doubt about that. However, many first-time homebuyers aren’t aware of all the additional costs that are part of the home buying process (not to mention maintenance and improvement costs once the house is yours).
Before you leap to make an offer on your dream home, be sure you won’t be spooked by. . .
- Home inspection – Although a home inspection is not a required part of the home buying process, it is smart to know what repairs the house you’re considering might need and when. A home inspector assesses the quality of the heating system, attic, roof, plumbing, and more. Home inspection fees can vary based on things like the size, age, and location of your home, so it’s important to know how you’ll be charged and why. Be sure that you trust the qualifications and experience of your inspector; don’t just hire one based on price alone. If the home of your dreams has a major issue, this may give you pause before you purchase—or it may change the way you negotiate on final sale price.
- Appraisal – Lenders ask an independent company to determine a home’s worth to be sure that the value of the property is appropriate for the loan amount. Borrowers typically will pay for an appraisal early on in the process, and the cost can vary depending on the property and type of loan.
- Closing Costs – These affiliated home buying costs cover expenses like the processing fee, filing/recording fees, flood certification, and transfer taxes. It’s important to ask your mortgage lender about closing costs and loan fees you can expect to pay, because these costs typically range from 2-5% of the home sale price. If your property taxes and homeowners insurance will be paid through an escrow account maintained by your mortgage lender, the initial payment into that escrow account can make up a large part of the closing costs. Closing costs could add thousands of dollars to your total home cost, so it’s key to factor them into your budget.
- Moving Expenses – The cost to move your furniture and belongings can come at a real cost, depending on how large your items are or how much you have in storage. You may also be charged set-up fees for utilities such as water, cable, and power. It’s always smart to take these expenses into consideration when you’re ready to buy.
The multi-step process of budgeting for a new home, securing financing, and finding the right home can be intimidating—especially for first-time homebuyers. You don’t want to encounter any unexpected costs or scary surprises that might derail your progress. Buying your first home should be a treat, not a trick, so it’s critical to work with an expert mortgage lender who can walk you through what to expect and provide personalized guidance every step of the way.