Ever wonder how much a house truly costs? You can crunch the latest mortgage rates, estimate your tax & insurance payments, and take a realistic look at how much house you can afford after getting pre-qualified with a lender, but there are more expenses involved in home buying than just the property costs.
And those additional payments, if you don’t factor them in, can be high enough to derail your conscientious planning, even as you stay within your range when scouring Charlottesville Solutions for available listings while being careful not to go over your budget.
A good way to gauge these expenses is to ask your lender for a good faith estimate. This will help you keep everything in mind once you think you’ve located your dream home and not get too excited if it’s over your budget. Don’t worry if this happens though as the right one will come along!
Home-Buying Expenses: Add Them Up
Here are the line items you should keep in mind.
You’ve got your mortgage pre-approved, but that’s not all you will need to put down to get the keys to your new place. Services that need paying:
- An appraisal to confirm a reasonable market price for the property
- Inspections of structural, mechanical or other potential issues
- A real estate closing company or attorney to review all contracts
- A survey might be required by your lender
Property taxes vary widely – please see a recent blog on the local county 2014 tax rates. Depending on when you buy, you may owe the previous owners for property taxes they’ve already paid. You may also need to pay fees to a homeowners association.
Moving into a home can involve major expenses for packing, storing and transporting your possessions and yourself. If you’re moving across the country, the costs could be significant. Even moving across town can cost more than you planned for truck rental, movers and equipment, even with the help of friends and family.
Setting up your telephone, electricity, gas and water — did you budget for these expenses? They could cost more at your new place, especially if you’re moving to a larger home or from a rental.
You may need to purchase appliances or furniture – but be sure not to do so until after your loan has been fully approved as this may cause delays. Some items, like your old college concrete block & loose wood bookshelves, may not be worth the cost of moving. Again, if you’re sizing up, you face the potentially fun, but possibly financially draining, challenge of filling the new place.
Maintenance and Renovations
Trees fall on roofs. Gutters need cleaning. Driveways need repair…. A standard rule of thumb is to budget at least 1% of your home’s purchase price each year for home maintenance costs.
Maintenance can include things such as painting, replacing roof shingles, fixing or upgrading plumbing and wiring. The amount you’ll need to pay for maintenance can depend on the age of the home, the previous owners’ upkeep and the climate.
You won’t be able to obtain a mortgage without homeowners insurance covering both the property and its contents. However, the standard insurance may not cover natural disasters such as floods, tornadoes and earthquakes. Depending on where you live, you may want to consider taking out additional insurance to cover such risks.
Private Mortgage Insurance and Title Insurance
If the down payment on your home was less than 20% of the purchase price, you will have to pay for Private Mortgage Insurance (PMI), which protects your lender in case you default. It’s standard, and fees vary. The rules are complicated, but usually once you’ve paid down the mortgage so you owe less than 78% of the purchase price, you can drop the PMI payments.
Title insurance offers protection for you (and your lender) if you later discover that someone else could lay claim to the title, and therefore ownership, of the house.
Even if you’re lucky enough to avoid paying for PMI, find a low-cost attorney you can trust, and have a modern, energy-efficient house, these expenses can still add up to thousands of dollars. That prospect should not scare you away from homeownership, but it always helps to be prepared.