Are you ready to buy your first home? Buying a home is probably the biggest investment you’ll ever make in your lifetime. It is one of the most important financial decisions that’ll decide your lifestyle and the standard of living that you and your kids will have in the coming years. You may have found your dream home, and also arranged funds to buy one, but there are so many other costs involved that can take a toll on you if you are not really prepared.
Rather than repenting your financial decision, it is better to have an accurate idea about expenses that’ll come in your way. Even though you are prepared for everything, you must have a quick look at these 10 important costs involved with home buying.
Mortgage broker’s payment
After narrowing down the search of your dream home, the first thing you do is invest time in finding a reliable mortgage broker who can help you go through the intricate lending process, right from start to the finish. Mortgage brokers help home buyers to find different lenders who can lend money agreeing to their returning conditions.
A bank can be a good option for the lending money, but when you have no savings, and you can’t afford more than a 5 percent down payment on a 30-year mortgage plan, then contacting a broker becomes a necessity. Other than the loan amount and interest rate, you should also be prepared to pay a 1-5 percent commission to your broker.
Calculate the rate of interest
Whether lending money from a bank or private lender, calculate your rate on interest prior to applying for a selected mortgage plan. As a smart lender, it is very important to know how much you are going to pay as interest, and for how much time period. Choose a mortgage plan with a minimum interest rate after comparing various plans offered. Choosing a mortgage plan carefully can cut down your house cost by 5 to 6 percent.
Appraisal fee
To obtain a mortgage, you will have to pay an appraisal fee to the lender, so that he can hire a licensed professional who can access the value of your property with time. The process includes time to time inspection of your property, comparison to similar real estates in your area, and identifying the recent market value that is collateral for the loan. Appraisals are imperative in order to secure a loan from any lender. If a borrower defaults, the property can be put back on the market to help pay back the debt.
Survey and registration fee
A loan cannot be finalized without a property survey. To get the property survey done, you have to hire a professional surveyor who charges a minimal fee to conduct survey creating a drawing of a homeowner’s property, which shows the property’s boundaries, improvements and any encroachments or easements on the land. In the USA, a property survey fee can range from $84 to $600, and the median cost is $154. So, get prepared to spend here too.
Home insurance
Insurance is a must, as it covers your house for unforeseen dangers like accidents, flood damages or thefts. You may be on the hook for latent defects insurance, for example. Buying a home you can afford is all about budgeting, and insurance is one of the examples of an item that can be unexpected unless you do your research. So, get ready to spend a bit today on a decent home insurance policy so that you can easily overcome the damage caused to your property in the future due to a fire accident, theft, allied perils or burglary.
Closing cost
When you arrive to sign the closing document of your real estate transaction, be prepared to pay thousands of dollars as closing fees. The closing fee also includes transfer taxes from the seller to buyer, underwriting fees, credit report fee and attorney’s fee. So, get ready to save extra for these expenses.
Property taxes
Your property is tax chargeable, so it is important to have backup money to pay property tax every year. It is an additional cost for which you have to be prepared.
Maintenance cost
When we rent, we can always call our landlord when something breaks, but as owners, it’s our sole responsibility to take care of everything from breakage and repair to maintenance and renovation. A new homeowner sometimes underestimates the rate and frequency of household mishaps.
Despite a thorough home inspection, the only way to be prepared for these circumstances is to acknowledge that you will not be an exception to the probability of house repairs and maintenance. Consider having emergency savings to battle breakage, repair, maintenance and renovation cost.
Relocating cost
You should also be prepared for the cost involved in relocation, considering all the priced belongings in your house. Besides this, whether you choose to move during peak or off-season, it will also affect the relocating costs.
Selling your home
Selling a home is more expensive than buying. You may have to pay photographers, agents, marketing people, and lawyers – if not more. When you’ve finally found a buyer, the payments aren’t yet done. You’ll likely have to split closing costs with your new buyer. Even after the home has formally changed hands, you’re still a bit away from having money in your hand. When you receive the lump sum of money from the bank, you will have to pay taxes on it, unless you plan to invest directly in a new home.
As you can see, homeownership is an expensive affair, so you should definitely have in mind how you are going to cover these costs to ensure you don’t fall short of funds in the future.
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