When you’re buying a new home, be it an older property on the market or a new home construction recently made available, it’s essential to look at all of the costs that come with it. We’re not just talking about the price of the actual home, itself. Buying a home is a big commitment and there is more to it than most first-time home buyers know.
To make sure you can see it through from start to finish, here are some of the costs that you need to keep in mind and to plan for.
Though buying a home outright with cash is possible, most people are going to end up relying on a home loan, aka a mortgage, to be able to afford the home. The downpayment is an up-front payment to the lender that helps secure your loan. The average recommended downpayment on a home loan is 20% of the total value of the loan, but this can differ depending on the lender, your credit rating, the type of loan, and more.
Home Inspection Costs
A home inspection is a service provided by you by an independent third-party inspector that ensures you know what you’re getting when you buy a house. They look at the HVAC, plumbing, electrical systems, roof, foundation, floors, windows, doors, basement, and structural foundation of the home for potential issues.
If there are any problems with any of these aspects of the home, it’s reported on by the inspector. If you’re buying a newly constructed home, this cost isn’t necessary but, on average, a home inspection typically costs from $279 to $399, according to Home Advisor. This price does rise depending on the size of the property, however.
Once you have agreed to purchase a property and are ready to sign the dotted line, transferring the money for the deed in exchange, there are some closing costs that come with it. There are home loan closing costs, also known as origination fees, which may be as much as 5% of the total loan amount (the home price minus the down payment.)
A title search fee might be necessary so that a title company can make sure there are no problems with any title transfers. Then there are taxes such as transfer taxes, levied when the title is transferred from seller to buyer.
Mortgage payments and utility bills aren’t the only costs of homeownership that you have to deal with, either. Some of the key payments include things like home insurance and mortgage insurance, the former of which pays you back in the event of damage done to the home, while the latter secures your mortgage so that it’s still paid should you fall behind payments for legitimate reasons. HOA (Homeowners Association) fees are often charged on a neighborhood by neighborhood basis, changing depending on what services are provided by the association, for instance.
Without planning for all of the costs of purchasing new home constructions or existing homes, you can run into financial difficulties immediately, making homeownership all the harder. Put the proper planning into the costs you should expect for your own good.