Watch Out for These 44 Added Costs When Buying a House
You've found a house you like and a down payment you can afford, but buying real estate isn't that simple. There are thousands of dollars worth of extra steps, hidden fees, and charges between you and homeownership, and they need to be considered well before you make an offer. These are the costs to tack onto the cost of a home when tallying up your payments.
This $500 to $1,000 in "earnest money" basically states your intention to buy a home. It's a security deposit with a bit of a cooling-off period for those who get nervous about their purchase, but gets folded into the down payment if you actually go through with buying the house. Know that the check doesn't get cashed right away and may disappear altogether if you back out after the cooling-off period.
If you've bought a condominium — or a home, in some communities — you're going to have condo or homeowner association fees to cover the cost of maintaining and repairing common areas. The pools, lobby, landscaping, and elevators that enticed you into buying a home in the first place can cost hundreds to thousands of dollars a year.
It's right there in the real estate listing, but not factored into the price you see. Reading that tax estimate and dividing it by 12 will give some idea of what monthly payments will be, but getting an average property tax for the area will give some idea of just how high those taxes may get.
Couldn't come up with a 20 percent down payment? Your lender now views you as a foreclosure risk and will slap 0.3 to 1.5 percent onto the cost of a mortgage to protect themselves. It won't go away until the amount of mortgage owed drops to 80 percent of the home's appraised value.
If all you're doing to calculate mortgage interest is checking the rate on Freddie Mac, you're in for a surprise. Your debt, income, down payment, and credit score will also factor in to determine how many points you have working for or against you.
While you are entitled to a free copy of your credit report every year, mortgage companies have to pay for it. They pass that cost on, and it can set you back $25 to $100.
You're being charged not only to have your mortgage application reviewed (unless you're applying for a Federal Housing Administration loan), but also for a flood certification fee, commitment fee, documentation preparation fee, wire transfer fee, processing fee, and tax service fee, often well into the four figures.
Another fee a potential homebuyer is charged simply for dealing with a mortgage provider. Sometimes it's a flat fee, but often an origination or service fee is 1 percent to 2 percent of the cost of the loan.
Attorney fees, title insurance, property transfer taxes: All fall under the heading of closing costs. They also vary widely by location, with some of the costlier cities in the country hitting homebuyers around $7,500 or more in closing costs, while some areas could be closer to $3,000.
You aren't just paying off a mortgage with monthly mortgage payments. If you're paying insurance, PMI, and property taxes, you'll be utilizing an escrow account that will require an initial escrow deposit. That amount will be determined by the cost of your insurance, taxes, and other payments.
You're required to have a general home inspection, but if you have specific concerns, you may have to pay for specialized inspections. Pests, lead-based paint, chimneys, easements, foundations, the roof, soil stability, radon, methane, asbestos, well water, and other concerns often require a la carte inspections to address.
Don't just assume the stove, refrigerator, dishwasher, washing machine, dryer, or chest freezer seen during an open house comes with the home. If they aren't part of the conditions of sale, they may be gone when you move in and add yet another cost to the home purchase.
In damp climates, a mold inspection should be mandatory. But mold doesn't always show up when it's most convenient. It hides in attics, behind wallpaper and carpets, and in other corners. It's fairly simple to prevent, but costly to remove.
A new home may have flimsy siding, wonky floors, inadequate waterproofing, or other problems — and though sellers only have to disclose less-than-obvious defects if they know about them, there are ways to duck some of that responsibility. Research a builder's reputation and don't do something foolish like stint on inspections.
If a newly built home doesn't have fencing, a deck, window coverings, or even landscaping, don't just assume it will be there after you close the deal. Ask the builder; if what's missing isn't included and doesn't fit your budget, ask the builder to cover closing costs and free up some money.
Be careful when touring a model home, since features there often won't be included in a less-expensive newly built base model. If you see a grand foyer, granite countertops, hardwood floors, or especially large bathrooms, ask if they are included in the base price.
Looking at a whole development of new construction? You can't tell what a neighborhood is like if there isn't a neighborhood there. If the school district isn't established, the crime rate hasn't been measured, and no neighbors have moved in, what will be the cost of addressing all of the above in the future? A new subdivision or community is a gamble that's up to the homebuyer to assess.
You finally have a dedicated parking spot that belongs to you and no one else. You also have a stretch of asphalt, concrete, brick, or other material that the local Department of Public Works won't fix. Unless you have a gravel driveway that costs $300 to repair, tops, you're looking at an average $1,500 each time it needs a repair.
Are you off the grid and on well water? Did the previous owner dig a well just for irrigation? In either case you have a well to maintain, and that costs money. It may be less than the cost of municipal water, but maintenance is harder to do without a paid crew and can get really expensive if you don't know your way around a well pump and keep running the well dry.
You can save money in the long run by using more energy-efficient light bulbs, but they're going to cost far more up front. You'll face a similar conundrum with windows and thermostats.
Cable, phone, and internet providers are responsible for wiring leading up to a house, and if there's a problem in their wiring or even the box outside, they have to deal with it. If it's an issue with wiring in your new walls or with your hardware, it's on you — and bringing in someone to rewire portions of your house can get costly in a hurry. Determining where the problem lies is also no fun.
You can poke around the attic and see what kind of insulation you're dealing with in your home, but you won't know exactly how well-insulated the place is until winter. If it's chilly and drafty, the costs of insulation, even with a tax credit, can add up more quickly than you can say "Do we really have to open that wall?"
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