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.
Do you like having a home and all of the items in it? Unless you want flood, wind, or fire damage to take that all away, you'll pay an average $1,083 a year in insurance.
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.
Yep, you're going to be charged just for applying for a mortgage, and that fee can balloon to $500. Make sure you have your credit in order, as that's a lot of money to waste on a declined application.
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.
An appraisal determines the value of the home and loan-to-value ratio of the mortgage. The cost of the work has to be paid up front, since an appraiser needs to be paid regardless of whether you buy a home. Expect to pay around $300 to $500.
If your credit score is too miserable to get the lowest interest rate on a mortgage, you could always pay your way out of it with a "discount" fee. This "discount" can be 1 to 3 percent of your purchase price.
The good news about the lender credit you get when locking in an interest rate is that it will reduce the amount paid in closing costs. The bad news is that you're likely paying a higher interest rate than you should. Crunch the numbers before taking this option.
It's great that a mortgage provider wants to lock you into the best rate possible, but don't think they're happy about missing out on a higher rate. A rate lock on a $250,000 mortgage, for instance, could end up costing you 1 percent of the loan ($2,500).
Someone has to search public records for your new home. Then there are notary fees for the person witnessing your signature on documents, government filing fees, and other title-related fees. Set aside between $150 and $400 for these services.
To determine the size and dimensions of your property, you'll need a survey. The cost of surveying property hovers around $463, but can be as expensive as $950.
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.
There are all sorts of little charges hidden in those closing costs, including a roughly $50 charge just to make sure all of a property's tax payments are up to date. It may seem like a hassle, but so is buying a home with a tax lien on it.
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.
As Trulia's real estate agents point out, you're well within your rights to ask current homeowners for their utility information before buying. It'll give some idea of what a home's monthly costs will be, but also what issues may need to be addressed.
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.
When buying a newly built home, you are by no means obligated to take the financing offered by a builder. In many cases, it is far from the best offer available, so consider all mortgage options before moving forward and avoid an unnecessary cost of buying.
If you don't like what you're seeing at first glance and think "Hey, I can fix this," get a rough estimate first. Remodeling multiple rooms can add an average $40,000 to the cost of a home.
If your house comes with a functional fireplace or wood stove, the best-case scenario has you cleaning it annually for an average of $224 a pop. If it needs to be repointed, rebuilt, or lined, that one-time cost can run into the thousands.
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.
Hey, they're still out there. Not hooking into a sewer system can save a bundle, and septic tanks also cost relatively little to maintain every few years — but a lot to repair if you don't do proper maintenance.
If you're moving from an apartment to a house, expect to spend a lot more time cleaning. While that, in itself, isn't costly, cleaning supplies are. And foisting it off on a cleaning service costs an average of $166 each time.
The average U.S. worker makes just under $27 an hour. Keep this in mind when you're spending an increasing number of hours each week cleaning, fixing, and maintaining a new property.
If you aren't spending time cleaning gutters, you're spending $70 to $250 to have someone else clean them. If you have a steep or incredibly high roof, it's far less than the medical bills incurred from a fall.
Bet that seemed like a great feature during the home-buying process, too. But simple maintenance comes with a $115 average price tag that only gets higher if you don't figure out how to do simple winterization yourself.
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?"
Pride of ownership makes you think you can take on just about anything a new house throws at you. It also makes your local contractors very happy, as they know they'll have to fix any project you either botched or couldn't finish.
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