Buying a Home - Extra Expenses to Prepare For
The first thing that comes to mind when you're buying a home regarding expense is the down payment and monthly mortgage cost.
There are, however, quite a few things that can catch you off-guard and may find yourself unprepared.
12 Additional Expenses
Exciting, isn't it? The prospect of buying a home, possibly your first? Make sure you're prepared for these additional expenses:
Earnest Money: The amount can vary. The most common amount is $500, but sometimes a seller requires $1000. A cash transaction, especially on a foreclosure is typically 10% of the sale price. Although earnest money is not "required" in a real estate transaction, almost every seller will command that it be included.
Appraisals: The average cost of an appraisal is $450, might be more, might be less. A buyer should inform their lender to hold off on ordering the appraisal until after the home inspections are completed and satisfactory. There is no point in paying for an appraisal should the home fail the home inspection phase of the purchase process.
Inspections: Only have inspections done for the home you have an offer on and never forego inspections even on newer homes. What you don't know about your new home could cost you substantially. A whole house inspection costs about $275.00 (could be more or less depending on the company used and the size and location of the home). A termite inspection costs $65 on average. A radon inspection is $175.00 on average. All in all, be prepared to shell out about $500.00 for all of the mentioned inspections.
Re-Key: Most but not all sellers of foreclosures will charge a buyer on average, $150.00 to re-key the door locks right before the closing. This fee is typically non-negotiable and usually only covers one handset, sometimes two.
Property Taxes: The majority of people financing their home purchase will have their property taxes included in their monthly mortgage payment. If the property taxes are $3600 annually, then you can expect to pay $300 more per month on top of your mortgage P&I. (principal and interest) If the purchase is a cash transaction, be prepared to make semi-annual property tax installments.
Private Mortgage Insurance: Almost all mortgages that do not contain 20% equity will require PMI. This can add anywhere from $60 or more to your monthly payment. The amount of PMI is determined by the size of your mortgage.
Closing Costs: When financing a home, a buyer can expect to shell out anywhere from $2500-$5000 for closing costs at the closing. The amounts can very greatly depending upon your lender and the title company being used to complete the transaction. Your Realtor should check with your mortgage person to get a good estimate of the amount needed and in many cases, closing costs can be paid by the seller in the purchase contract.
Home Owner's Insurance: Most home buyer's will include their home owner insurance premiums in with their monthly mortgage payments. The cost will vary greatly depending upon a large number of factors including, but not limited to: the value of the home, the location of the home, the credit worthiness of the buyer, the amount of coverage required to satisfy the mortgage company and so on....expect to pay about $750 on up for home owner's insurance.
Home Warranty: There are several different home warranty companies available to choose from. Depending upon the company being used, the cost for an annual home warranty can range from $295 to $530. Each company and price plan offers varying degrees of coverage, so you should choose the plan and company that best suits your needs.
HOA: Some neighborhoods will charge a monthly or even an annual HOA (home owner association) fee. There are also several neighborhoods that do not charge for an HOA at all. HOA's can offer a variety of services and typically the amount of services being offered will be reflected within the amount being charged. A few examples of HOA fees and services might be; $150 annually. Something like this will typically cover flowers and landscaping and perhaps a small park for the kids in the neighborhood; $450 annually might include a neighborhood swimming pool and clubhouse, landscaping, etc.; $80 monthly, might include lawn mowing and landscaping, snow removal, etc. You are your Realtor should be aware of any HOA fees and their coverages before entering into a purchase contract on your next home.
Appliances: Depending upon your needs and choices for appliances, you could spend as little as $1000 for a complete set of used appliances or you could easily spend $3000 or more for new ones.
Helpful Links for Buyers
What Type of Home is Best for Me? - "Is a HUD home better than a Foreclosure?"
Avoid Mortgage Fraud - It happens more than you think!
The Importance of Inspections - What you don't know could cost you