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The real cost of your next home
June 15, 2017
Buying a house is most likely one of the most expensive decisions you will make in your lifetime. You may have found that with a USDA or FHA loan at Central Sunbelt, the upfront costs can be less than you think with a down payment as little as 3.5% - or better yet ZERO.
That being said, aside from just a down payment, there are additional costs when it comes to purchasing a home. To fully prepare yourself, take a look at the list below to see what other items come along with your new home.
Appraisal fee - While typically the lender is in charge of hiring the appraiser, the cost is passed on to the home buyer. The actual cost varies by the location and size of your house as well as some other factors but be expected to pay $300 - $400.
Home inspection - Unless an arrangement has been made with the seller, the home inspection falls under the responsibility of the buyer and can cost upwards of $500 for a complete home and property inspection.
Homeowner's Insurance - Unless your homeowner's insurance is being escrowed into your monthly mortgage payment, you may have additional out of pocket premiums. The cost is dependent on many factors but could be as little as an up-front monthly payment or a six month premium.
Private Mortgage Insurance - For certain mortgage types, such as a conventional mortgage loan, private mortgage insurance (PMI) is a separate policy that is required if your down payment was less than 20% of the purchase price. PMI protects the lender against payment default whereas homeowner's insurance protects the homeowner's property. This cost varies but discuss it with your lender to see if you will require it and if so, how much it will cost.
Attorney Fees - Attorney fees for the title exam, settlement, document preparation, CPL, courier, reconciliation fees, etc. add up fast. These attorney fees can be paid in part or full by either the buyer or seller, depending on the agreement. When left for the buyer, expect to pay $700 to $1000 to cover them all.
Moving Costs - Moving costs can come in all shapes and sizes. At its cheapest, this can be the cost of packing materials, several tanks of gas, drinks and food for your friends, and possibly a truck rental. On the other end of the spectrum, a professional moving company can be hundreds to several thousand dollars.
Utilities - Don't underestimate the cost of utility or other home service costs. Chances are you had most of the same utility expenses at your last place, but there may be additional service costs at the new location in addition to installing or turning on certain services such as natural gas, cable or satellite installation, pool service costs, and more. Though typically not expensive by themselves, these items can add up quickly and at a time with so many outgoing expenses can make a big difference if not fully prepared.
Renovations - The "perfect" house can come at a premium but even perfection is subjective. Even if your house is 'move in ready' and requires little to no work, there are generally some plans in mind to make it your own. The cost is of course completely up to the scope of the projects in mind but most buyers have a vision to at least paint some of the rooms, if not all, and moving in is the best time with the rooms completely bare. Be mindful of your check list when selecting your house and keep those costs in mind when budgeting for the purchase.
Household items - With a brand new house, getting by without buying anything to go inside is a rarity. Some of your old household items / decor just may not work. You may have additional rooms or space that you did not before or simply may find it an opportune time to get rid of some items you've been wanting to for years. New furniture, curtains, blinds, and other household items can be expensive. Plan and save to keep yourself from having to take out an additional loan after move in to cover the costs.
Emergency Fund - With all the above costs adding up and the addition of a down payment, it can be difficult to maintain a healthy emergency fund. With the purchase of a new home, you never know what could be right around the corner for maintenance, repair, or other non-house related emergencies. As a rule of thumb, try to keep several months expenses put back to cover an emergency. This will make sure you're still able to handle an emergency without needing additional loans or worse yet- put in a situation where you cannot pay your bills.
Buying a new home is an exciting time and a wise investment. While the upfront costs may seem steep, use it as an opportunity to save and / or build equity to give yourself a stronger net worth and bigger financial future. Contact Central Sunbelt to assist with your road map to home ownership, regardless of which stage you are in. Whether you are ready to buy, or ready to start saving, we can give you the knowledge and tools you need to make realty a reality.