Don’t Let These Home Buying Expenses Catch You Off Guard
When you’re looking for a new home, there’s a lot of focus around how much money you’ll need to borrow and how interest rates will impact your monthly mortgage payments. But home ownership comes with a list of expenses that go beyond repaying your mortgage. Take some time to consider these additional costs and plan ahead so you don’t buy more house than you can afford.
Private Mortgage Insurance
Private mortgage insurance (PMI) is usually required to obtain a conventional home loan if your down payment is less than 20 percent of the purchase price of the house. It helps protect your lender if you stop making your mortgage payments and default on your loan. PMI is usually paid with a monthly premium, but some lenders have different payment options.
Property taxes are calculated based on the value of your property. But tax rates vary widely from state to state and county to county. So, be sure to find out what your property taxes will be before you make an offer on a house. Taxes can add several hundred dollars to the amount you owe each month. For example, if your property taxes are $3,300 a year, that’s an extra $275 you’ll have to pay each month in addition to other mortgage related expenses.
Home Inspection Fee
The last thing you want to deal with after moving into a new home is an expensive repair. A home inspector will examine the physical structure and major systems of the house to determine if any repairs are needed. While an inspection won’t identify everything that may be wrong with a home, it can identify many major issues that could end up costing you a bundle. The home inspection fee will probably run you several hundred dollars, but exact figures vary based on location.
Home Appraisal Fee
A home appraisal is an estimate of the fair market value of the house. It helps ensure the selling price is fair and the amount of the home loan is reasonable, which is why lenders almost always require one. The cost for an appraisal is generally a few hundred dollars. Sometimes the home buyer is responsible for paying the fee, but sometimes the seller is responsible for the cost. Be sure to confirm with your mortgage lender which party is responsible for paying the fee.
Closing costs are one-time fees that are due at the time you close on the house. They include several fees such as origination fees, attorney fees, title insurance, and more. You can typically expect to pay between 2-5% of your home’s purchase price in closing costs.
Homeowners insurance can help you cover the cost of repairs if your home is damaged. If you have a mortgage on your home, chances are your lender will require it. The cost of a policy varies widely based on several factors, including the value and age of your home, the type of structure and more.
Routine Maintenance and Repairs
If you’re used to renting, being responsible for repairs and routine maintenance can come as a shock. You’ll no longer be able to call your landlord to fix the leaky faucet or replace the water heater when it breaks. One general rule of thumb is to plan to spend 1% of the value of your home on routine maintenance and repairs each year. There may be years when you don’t spend that much; but if you have a major project such as replacing the roof or updating your HVAC system, it may cost you much more than that.
Are you ready to buy your next home, but you’re not sure how much you can afford? Our mortgage calculators can help you determine what your monthly payments will be. And when you’re ready to take the next step, Robins Financial offers a variety of mortgage loan options designed to fit your budget and lifestyle. Contact one of our Mortgage Specialists today to find the home loan that’s right for you.