One of the most exciting moments in anyone’s life is when they purchase their own first property. However, this is also perhaps the biggest expense you will have in your life. And the price tag of the property is far from the end of the story. The mortgage is just one of the expenses you will face down the road, and the fact that many people tend to overlook additional costs when planning their budget can result in a headache or two in the end. However, being well-prepared and well-informed before jumping right in can help in lowering some of these unexpected expenses. So, for a start, here are some of the hidden figures behind buying a home you should be aware of before you sign that contract.
First off, inspections
Once you have your property of choice, you have to schedule inspections before anything is set in stone. Get a general home inspection that will point out any reason for concern. If you’re lucky, this is all you’re going to need; however, a general inspector may very well point out signs of damage that will require you to turn to another specialized inspector and so on. A lot will depend on how old the property in question is and how well it was maintained by their previous owners. However, even if it looks new and well-maintained, a proper inspection is advised, sometimes even required. So, be prepared to pay anything from a few hundred dollars up to over a thousand on this front.
Prepare for a loan origination fee...
You might already know that more often than not, paying a mortgage rather than rent is a better deal: not only is it cheaper, but you also own your property. However, taking out a mortgage comes with some extra expenses. Be aware that when you’re taking out a loan, your lender is going to charge you with an origination fee you have to pay upfront. This fee can become quite hefty considering it represents about 0.5-1% of the overall amount of your loan. Make sure you research how much different lenders charge you in this regard to save a few dollars!
...as well as closing costs
Another often overlooked expense that many forget to include in their calculations is closing costs. This represents a fee paid after the seller accepts your offer and the transaction is completed. These costs will, again, vary depending on the price of the property as well as other factors such as your loan type, your lender and, of course, your country or state, but be prepared for 2-5% of the value of the home. This is no small amount we are talking about, so it should be included in your budgeting from the very beginning.
A mistake especially inexperienced first-time buyers make is trying to do everything themselves. While it is true that you can do your own research on the neighborhood and compare prices, the information you will get is nowhere near as extensive and insightful as the one professionals can provide you with. So, while this is not exactly a “hidden cost”, if you handle everything on your own, you might end up paying considerably more than what you could have. On the other hand, experienced professionals such as Curtis buyer agents can find the best bang for your buck and perhaps even negotiate several percent off the price. So, don’t let sellers make you pay more than you should!
Insurance, taxes and so on
Another expense that you’re going to have to think about as a newfound homeowner is insurance. It’s not a good idea to leave this for the last minute, as deciding in a rush and choosing the wrong option can cost you a lot of money, especially in the long run. Here, too, you might want to speak to a professional to make sure you get the best policy and coverage, no more and no less than you actually need. Moreover, a new property means new taxes which you’ll have to familiarize yourself with. These can change over time so make sure you keep yourself up-to-date whenever you make a bigger change to your home.
For the future
On top of all of this, you have to make sure you don’t completely empty your funds. You have to have an emergency fund for any unforeseen circumstances. Owning a property comes with a slew of new responsibilities, and you never know when a major appliance is going to break down or when you’re going to need to call repairmen to fix up something around the house. Moreover, if you are moving into a house from an apartment, you will find your bills skyrocketing, which may set you back for a while until you get the hang of things. All in all, the long list of expenses does not stop when you finally buy your property and move in; a bunch of things will be waiting for you to balance them financially in your new home.
Buying a home is not a cheap endeavor, but it can be even more expensive if you are not well-informed and don’t plan your budget properly beforehand. Don’t forget to include all of the “hidden” costs, as those hundreds of dollars can add up quickly, and save yourself from trouble.