For many people, their home is the most expensive thing they will buy. Before you start house hunting, you’ll likely put together a budget according to what your needs are and what you can afford. While the final purchase price is well-known to the buyer, there are many additional costs to buying a home that should be taken into consideration when you make your budget. Adding estimations of all costs will ensure that you don’t buy a home you can’t afford. Read on to learn about a few additional prices that will be tacked on to the final bill when it comes to buying a home.
The down payment comes out of the sale price, so while it is less hidden than other home buying costs, buyers should be aware of how much they are expected to put down in order to get their loan financed. Depending on the market and the lender, this could be as little as 5-10% of the purchase price. In very competitive markets up to 20-30% of the purchase price is required as a down payment. Leave buffer room in the budget for the down payment since the price varies depending on the market and the home itself.
During the negotiation period, the major hidden cost is inspection fees. The cost of the inspection is based on the size of the home, so the fee for a standard inspection can vary from a couple hundred dollars to more than $1000. According to the Surrey pest control professionals at Pest Detective, additional inspections are recommended in some markets or for older homes, such as inspecting the sewer or a pest inspection. These can add on another $200-$500 depending on the area and the extent of the inspection.
Many homes require some remodeling before the new owners move in or there are repairs that are required as a result of the inspection. While these can sometimes be negotiated into the purchase price of the home, buyers should beware. Remember that some of these repairs and remodeling might come later down the road. You should consider whether or not you will have the money to replace a leaky roof or fix a cracking foundation in the next few years if these areas are already demonstrating problems.
Closing costs are charged by the lender and incorporate loan origination fees, the cost of running a credit report, appraisal fees, and title insurance, among other hidden costs. These are typically 2-5% of the purchase price of the home and vary based on the lender. These costs will be even higher if you have used a realtor in the home-buying process, so take that into account as well.
Furnishing the New Home
For buyers moving into a home larger than where they live now, there might be costs to furnish the additional rooms. These costs will vary significantly based on the buyer’s situation, and the size and age of the home. Some sellers will leave furniture or appliances behind and include them in the cost. It is important to discuss with the seller what the price of the home includes so that you can factor in the price of any new furnishing you’ll need to buy after moving in.
After the sale has closed, one additional cost can come as a surprise to many home buyers: property taxes. While property taxes are discussed during the purchase, the amount of tax can change if the sale price is significantly higher than where the house was previously appraised. Property taxes may not change, but depending on the last time the house was sold and local property tax laws, taxes can be up to double, triple, or more than the previous owners were paying.
With the exception of the down payment, the majority of these costs are not directly taken into account in the purchase price of the home. As such, they should be carefully considered by home buyers since they can quickly add up. Some people neglect to include these costs when setting a budget and get in over their head by thinking they have enough when they don’t.