Buying a home is a big decision and also a huge investment. You’re not just paying for a place to live, you’re also adding to your net worth. Because this is such a large investment, there are some extra costs of buying a home that you should be aware of.
Costs of Buying a Home
Buying a home has more costs that renting, especially upfront. Here are a few expenses that you’ll want to be aware of to prepare yourself for this big purchase.
The down payment is the biggest upfront cost you’ll have when it comes to buying a home. Ideally, you want to have 20 percent of the purchase price in the form of a down payment. If you’re unable to come up with that amount, there are down payment assistant programs and specific loan programs that don’t require a full down payment (although there’s typically a minimum of 3.5 to 5 percent down payment needed).
Keep in mind that if you do not have the full 20 percent, you will have to pay a Private Mortgage Insurance premium (PMI) each month with your mortgage payment. Mortgage lenders require this to protect themselves in case of a loan default. So, having a fully-funded (20 percent) down payment will save you money in the long-run as you won’t have this extra monthly fee.
Closing costs consist of a few different expenses. This includes real estate attorney fees, taxes, title expenses, and mortgage processing fees. These usually only total a few thousand dollars, but overall it will depend on where you live and how much your purchased home is worth.
There are some extra fees that come with the actual home purchase. These include home appraisals and home inspections. According to U.S. News & World Report, the home appraisal is necessary when it comes to your mortgage lender. No credible lender will lend you money until they know how much the home is actually worth and what the resale value would be like (with the worst-case scenario in mind).
Home inspections are also important, especially for you, the buyer. This will let you know if there are any main problems with the home and if anything needs to be addressed or repaired. If there is a major issue, you can then negotiate the offer price or get out of the deal all together.
Once the home is officially yours, there are then the actual costs of getting you and all your stuff in the home. Costs can vary depending on how far you’re moving from and the methods you decide to use. Boxes and other packing materials can add up fast, so try and be conscientious of how you’re packing.
Using professional movers can be a substantial cost, so if you’re only moving across the Valley you could save money by bribing friends to use their trailers.
The costs of buying a home don’t end when you move in, you’re not out of the water yet in terms of costs. You will not only have your monthly mortgage payment, but you’ll have taxes and other fees to think about (thanks HOA). Remember, you’ll also be responsible for repair and maintenance costs.
Making the decision to purchase a home is a big one, but it can be a worthwhile decision. The feeling you have when you own a home is unreal. Let’s get you in your dream home! See what loan programs you could qualify for, and CALL us today! 480-832-4343
For more information on the costs of buying a home, check out these articles:
NerdWallet: “What it Costs to Buy a Home”
U.S. News & World Report: “The Hidden Costs of Buying a Home”
Bankrate: “Calculate the Costs to Buy a Home”