Buying a house is a huge step in life and one that you should approach with awareness. Every home you find on the market has a price tag, but there are costs associated with the purchase. Before deciding to purchase a house, here are some of the expenses you need to consider.
The Down payment
The down payment on the house is a one-time cost. There are a variety of loan programs out there to suit your needs. We strongly recommend getting pre-qualified with a trusted mortgage lender in town. We can introduce you to such a lender at your request.
The lender will ask for an appraisal to verify the cost of the home you are buying. Usually, the lender will require you to pay this fee upfront before the appraisal.
Closing costs are fees paid to the lender and third parties to finalize a mortgage. The costs can be anywhere between 2% – 5% of the loan amount, but there is room for negotiation. It is wiser to pay them up-front from your pocket instead of including them in your loan. If you ask the lender to add them to your loan, you may pay interest on the closing costs.
Mortgage payments are predictable costs of taking a mortgage to purchase your home. Every month, you will have a specified amount that you are required to pay to the lender.
Property taxes vary from state to state. When consulting with your real estate agent, ask them to give you a rundown of property taxes in the area. However, the taxes can increase and decrease depending on the municipality decisions, an increase in your property’s value, and overall market conditions.
Homeowners and Hazard Insurance
To protect your home, you are required to get an insurance cover. The homeowners insurance protects you from issues such as fire or theft, while hazard insurance is for natural disasters.
If you make a down payment that’s less than 20%, you’ll likely need to get mortgage insurance. The premium is meant to protect the lender if you eventually default on the loan. Mortgage insurance can cost up to 2% of the loan amount annually.
You can make an upfront payment and bundle your monthly premiums with the mortgage payment. Once the amount you have paid on the principal dips below 80%, you can cancel your mortgage insurance. Until you clear the 20% down payment, mortgage insurance is one more cost you have to consider.
HOA, Co-op, or Condo Fees
If you are buying a house in a planned development, you need to consider the homeowners association fees, or co-op and condo fees. These costs cover the maintenance of shared amenities such as pools, clubhouses, landscaping, painting, and shared utility bills. In pricey urban areas, the HOA fees can be extremely high.
When buying a home, you should consider costs beyond the monthly mortgage payments. To find out more information on the costs of purchasing a home, contact EXP Realty today.