The Hidden Costs of Buying a House
It’s common to spend your precious free hours learning about the ins and outs of buying a house. We know how exciting it could be because it’s a meaningful milestone in your life, and one you should celebrate. At the same time, buying a home is an anxiety-riddled process with lots of transactions happening in such a small period of time.
The best thing you could do is keep doing what you’re doing – research and preparation. That’s why we’re here to talk about something that gets brushed under the rug for many: The hidden costs of buying a house. The true cost of home ownership reaches past just a mortgage. You have to factor in the hidden costs so you know what you can comfortably pay every month.
A tax figure that couldn’t be more unique. The price of your property tax varies by your local area and state. Some areas have dealbreaking property tax while others are close to nothing. It’s a cost that continues throughout the ownership of your house. Property tax is calculated based on the value of your home combined with the house location. Generally, your property tax is included in your monthly house payment.
Costs of Moving
Moving to a new home is a lot of sweat work on your own. It is possible, but you probably need a truck and plenty of time on your hands. If you don’t have the time or energy to move everything yourself, you can pay professional moving services. They could charge a few thousand dollars depending on how many items and furniture you have.
Home buyers who put down less than 20% for a down payment typically have to pay for mortgage insurance. Mortgage insurance lowers risk to the lenders when they loan you money. It also helps you qualify for a loan if you were having trouble securing one from a lender. On average, mortgage insurance costs between 0.58% and 1.86% of the original loan amount per year.
Far different from mortgage insurance, this type of insurance protects you as a homeowner. Homeowners insurance pays for emergencies such as losses or damage to your property. Lender’s want to know if you’re insured and require proof that you have insurance. There are different coverages that you can add like for earthquakes (which usually isn’t covered). The most common insurance had a national average cost of about $1,200 annually.
A general method for paying homeowner’s insurance is done with an escrow account. The homeowner pays their monthly mortgage with the homeowner’s insurance payment attached to the lender. The lender takes the money due for insurance and pays it through the escrow account.
Loan Origination Fee
This is the cost of a lender who sets up your loan structure. The expense is determined by the original amount of your loan. Usually this is up to 1% of the loan. Factors such as the loan type, loan period, and value affect how much the fee will be. After you set up your mortgage application, a loan officer charges to process the loan. You can pay the fee on the front or back end of your structured deal depending on your preference.
Cautiously think about utilities as a hidden cost when you buy a house. Even though you probably have a gist of the common ones such as electricity, gas, water, and internet keep a few things in mind. Your utility usage varies from each home because of the size. Your old apartment probably needed far less utility usage to sustain your living area than a larger home. As you search for a home, make note of the size, the amount of lights, and how many rooms there are.
The Costs of Closing the Deal
These are a bunch of small fees that could really add up once you’re getting serious about a particular home. Closing the deal when you buy a home has lots of tasks ahead. You can prepare by knowing what kinds of hidden costs there are:
- Inspection expenses
- Lawyer fees
- Appraisal (further evaluation)
- Document costs
- Title fee (and sometimes title insurance)
- Mortgage applications
- Land survey fee
Once you’re moved in, do your best to have an emergency fund available. We never know what the future holds for us, so it’s best to make this fund a priority. The future of what could happen is a hidden cost alone! Some of the most common home repairs include:
- Electrical issues
- Roof repairs
- Water heater
- Pipe replacement
- Heating and cooling units
- Mold removal
Home maintenance is going to continue as you live in your new home. Most of the listed common repairs above cost anywhere from a few hundred to a few thousand dollars. Map out a plan to save money every month in case of an emergency.
Keep Caution with Hidden Costs
Buying a home is a life milestone and you deserve congratulations! You’re doing what’s in your best interest by doing the research ahead of time. By staying prepared, you are far less likely to get caught off guard by any surprises associated with buying a home.
Hidden costs add financial pressure to your situation and may stretch your budget. Keep hidden costs in mind as you continue your search. The real cost of buying and owning a home reaches past just a mortgage. Factor in your hidden costs so you know how to plan your budget and put away money comfortably. We hope this list gives you a better idea of what to expect!