7 Costs To Know About When Purchasing a Home
Purchasing real estate can involve a lot of up front expenses and can often be overwhelming. As a first time buyer there is a lot research to do on top of making sure that you have plenty of money available for each of the necessary steps. Most everyone is aware of the down payment required for your loan, but not everyone knows about all of the other miscellaneous expenses that arise after your offer is accepted. Here are 7 substantial costs to be aware of as you purchase your home.
Mortgage Rate – Make sure you shop around for the best mortgage rate when looking for a home loan. Some may vary by a fraction of a percentage point, but that can mean thousands of dollars over the course of your loan. There are many different loan types, terms and the option to pain points at closing to save you over time.
Appraisal Fee – Every lender will want to be sure that the price you are paying for a home is not more than the market value. Therefore a property appraisal is necessary for confirmation. These can range in cost from anywhere between $300 and $700.
Home Inspection – As a home is one of the largest investments one makes, taking a closer look is most important so there aren’t any surprises down the road. Paying somewhere between $200 and $500 on a home inspection will help you budget for repairs while you identify if any unexpected immediate repairs will need to be made.
Closing Costs – Your lender should be able to give you a “good faith” estimate for what to expect to pay for closing costs. These include things like attorney fees, pre paid items, taxes and the like.
Property Taxes – Property tax is one of the more significant annual costs associated with home ownership. Check to see what property tax rates are like in the area to estimate what you will be paying. These are never guaranteed to be the same each year and are subject to rise. Furthermore, as taxes are paid in arrears, there is nearly always going to be an increase in what you pay versus what the current owner is paying.
Homeowner’s Insurance – If you are financing your home then insurance is a necessity. However, just like mortgages, insurance rates can be shopped for better rates. Depending on your home’s location, additional insurances may be required if in a flood zone or the like.
Escrow Account and Mortgage Insurance – This can also be a sizeable number, but some of these monies are pre-payments. When opening up a mortgage account banks will ask for funds in advance to build up escrow for insurance and taxes. Also, if you are putting less than 20% down then you will be required to pay mortgage insurance. Your mortgage agent will provide you with this number that you will pay monthly on top of your regular payment.