Tuesday, April 16, 2019

The Real Cost of Buying a Home

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Owning your own home is considered by many to be a rite of passage to adulthood. There are many benefits to owning your own home, but it’s also rather scary. A mortgage often costs less than renting, but there are other considerations to take into account when deciding to buy a new home. Having all the necessary facts is going to make this important decision much easier.

Your mortgage is one of the most predictable payments associated with buying a home. However, that’s not the total amount you’re going to be paying. Here are some of the other costs that often get overlooked.

Closing Costs
Your down payment is the biggest initial cost you’re going to be making, but closing costs are another big surprise you need to allow for. They are onetime fees paid to your lender and other third parties and can add up to several thousand dollars. They include an appraisal and survey fee, wire transfer fee, underwriting and origination fees, document prep fee and discount points. On top of that, you’ll be paying a credit report fee, title insurance, and recording fee.

Real Estate Commission
If a property is being sold through a real estate agent commission has to be paid. Generally, it amounts to around 6%, which is split between the buyer’s and the seller’s agent. If you’re buying, however, you don’t need to worry because commission comes out of the seller’s funds. If you’re selling a property, it’s worth asking for a lower commission before signing with a real estate agent.

Property Taxes
Property taxes are paid to the local government. Tax laws and policies can vary by state and county and they can change from year to year. If you undertake any renovations or the property market changes and your home’s assessed value increases, this can also cause property taxes to rise.

Different Types of Insurance
The types of insurance you’ll have to pay differ depending on the state or region where you’re buying. Homeowners insurance is the most common type you’ll need to pay for. Find out more by clicking on this useful page about home insurance. Hazard insurance is something else you’ll need to consider depending on the risk factors in your area. There is a third type of insurance known as private mortgage insurance, but you’ll only have to pay this if your down payment is less than 20%.

Utilities
The size of these payments is going to depend on the size of your new home but expect to be paying a couple of hundred dollars at least. Your real estate agent may be able to give you an estimate of the property’s utility costs so you can include them in your budget.

HOA, Co-Op or Condo Fees
If your new home is in a planned development, that includes shared spaces and a homeowners association you’ll have monthly assessment fees to pay on top of your mortgage. These fees help towards the cost of improvements to the complex. These can sometimes be very expensive so don’t forget to include these in your budget.

Buying a property is a serious financial commitment. Now you’ve got a better idea of the cost you’ll be able to work out a more accurate budget and find the right property to suit your needs.

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