When talking about saving for a home, down payments usually get the spotlight. While these are an essential component to the home buying process, you can’t forget about all the hidden fees that come with this milestone. Unexpected expenses like inspections, closing costs, and maintenance can sneak in and ruin the budget you meticulously crafted. Factor these commonly missed expenses into your budget plan for a smooth process.
Hiring a real estate agent
Most people know that hiring a real estate agent is commonly a part of the home buying process. However, a lot of people forget to factor this into their budget. If you choose to consult a real estate agent, you will also have to pay them a fee. Keep in mind that the more you pay for a house, the more you will have to pay your agent.
Most people hire a real estate agent to help them feel confident in their choice. It also eliminates a lot of leg work that you may not have the time or experience to do.
If you want to minimize your home buying costs as much as possible, and you feel confident in your ability to navigate the real estate market in which you’d like to buy, you may be just fine without an agent. These commissions tend to be 6%, split 50-50 between the buyer’s agent and seller’s agent.
Your offer has been accepted. Congrats! But it’s not time to pop the champagne just yet. Home inspections are going to be another significant cost you will have to make right off the bat. Chances are you will have to have more than one inspection.
At minimum, you will likely have to schedule a general inspection along with an inspection for insects that could potentially harm the wood. These will both cost you around a hundred to a couple hundred dollars. If you’re home is older, you may want to consider additional inspections.
Possible home inspections to consider:
- Lead-based paint
- Pool and spa
While these inspections may seem expensive, they will help save you money in the long-run. It is always best to catch issues with your home early to avoid festering issues that could cost you thousands.
Insurance and taxes
The cost of home insurance will vary on where you live, but expect to pay around $1,000 per year. This is to cover your home in case of a natural disaster, accident, or other unexpected events that may occur. Click here for a guide to saving $1,000 no matter what you’re income.
Taxes are not a topic most people want to think about but you can’t forget about property tax. This can vary based on a variety of factors including state and country. These are not a stagnant fee and they fluctuate often.
After you seal the deal, it’s time to start calculating the closing costs. On average, closing fees will cost anywhere from 2%-5% of the total home price. These costs include the lender fees, attorney fees, appraisal, escrow fees, and interest.
Lender fees: this includes administrative costs to wire transfer fees and fees for pulling your credit report
Appraisal: lender makes sure the home appraises for the sale price
Title or attorney fees: this includes government filing fees, escrow fees, notary fees, and expenses associated with transferring the deed to you
Escrow fees: You might be required to pay some of your property taxes and insurance into an escrow account upfront.
Interest: You’ll have to pay interest that’s prorated from the date of your closing to the first of the following month.
Maintaining a home comes at cost. There will be things that pop up, not only in the inspection, but throughout your time owning the home. Things like clogged drains, leaky faucets, and broken AC units are no longer at the expense of your landlord. You’re the owner which means these pesky issues are your responsibility.
But don’t panic.
These repairs will come in handy if you ever do decide to sell your home someday. If you take good-enough care of your house, you might be able to sell at a higher retail value than you bought it at. Keep in mind that these issues may only pop up every once in awhile and not put a huge dent in your wallet.
If you’ve lived in a rental property, you’re probably used to paying utility bills. However, many homeowners are shocked at the cost of their first utility bill. When you live in a home, you should expect to pay a much higher amount for your water, electric, AC, etc.
It’s no secret that it takes more energy to cool/heat an entire home rather than a studio apartment. Take these added expenses into consideration when planning to buy a home.
If you’re looking to keep these monthly bills as low as possible, check out these 5 full-proof ways to keep your monthly bills under control.
Buying a home is a huge milestone and a great investment for your future.To make this process as smooth as possible, look pat the down payment to all the hidden fees that may affect your budget. Next, check out how this woman bought her dream home on just $60k a year.