The Hidden Costs of Buying a Home
With the real estate market being so HOT – many renters are looking into purchasing their first home. Although becoming a homeowner is the single most effective way to create wealth…its important that you take all of the costs of home ownership into consideration. When buying a home you don’t just put down a percentage and then make mortgage payments every month. There are many additional costs that are involved in purchasing a home and they can be quite significant so it is important not only to be aware of them, but also budget for them. Although we are usually writing about tips for selling a home – today we cover some basics for the First Time Home buyer!
Factors to take into account when purchasing a home
• Homeowner’s association fee – this applies especially if you live in a condo, but could be an additional cost if you are choosing to live in a higher end community which has HOA fees.
• Mortgage interest – this is what your lender gets for lending you the money and it can vary depending on the size and terms of your mortgage contract.
• Closing costs – under these are appraisal fees, attorney fees, title insurance, property transfer taxes and the charges incurred by your lender to provide the mortgage. Closing costs can vary dramatically. You should look at all the fees you are paying carefully to make sure that there are no hidden ones. Depending on how you structure your home purchase contract, you may be able to get the seller to pay a portion of your closing costs.
• Maintenance costs – you need to be able to maintain your home after you have bought it.
• Property tax – you will pay a little over $2,000 a year. This can vary by state and county. The more your home costs, the higher the property taxes. Be sure to have a homestead exemption in place to reduce your property tax bill.
• Home insurance – this is in case of the loss or major damage to your home.
• Utilities – in the average home these come to about $3,000 a year. Its a good idea to ask the previous owner for the past 12 months utility bills — so you can have an idea of what your monthly utility bill will run.
What does THIS GUY say about hidden costs in homeownership?
Other than the hidden costs you should look into the following:
• Check on the condition of the roof. Roofs are expensive and if you buy a home that has an old one you will have to replace it at your own cost. When looking for a home to buy specify to your realtor that you are looking for one with a relatively new roof. Look on the inside of the attic for roof leaks, even if the roof appears to be new.
• Be more about the structure than the other things. You may be put off, for example, by the color of the walls when in reality they are very sound walls. You can put a different coat of paint and transform the rooms to your liking. Look for cracks in the mortar of brick on the outside. On the inside, see if the doors close properly or if they seem “out of square”. You can also look for cracks in the sheet-rock for any structural damage. If you believe that the home may have a structural deficiency, you will want to hire a structural engineer as the costs of structural repairs to a home can be prohibitive.
• Older homes tend to have heating and cooling problems so if you choose something old make sure that the air conditioning works properly. The plumbing also matters – check for leaks, water damage or mold. It can be a challenge to verify that the HVAC system works properly if checked during the winter months. If that is the case, its recommended that you specifically hire an HVAC expert to look over your system.
• The land that the home lies in also matters – if you buy a home that sits in an area prone to flooding, wildfires or other natural disasters you will be taking a huge risk. You can check to see if your home is in a flood plane by visiting the FEMA website.
• Insulation is very important. If you buy a house that doesn’t have proper insulation you will freeze during the cold months and will struggle to keep cool in the summer months. It will also cost you a lot of money to heat. Find out from the records the last time that insulation was done. Whether you live in the North or the South – having proper insulation is critical to keep energy bills down.
• Check faucets, showers switches, locks and everything else to make sure that they work. These may look like minor details but if you buy the home and find out that they are broken you will have to fix them at your own expense. Upon moving in, its a good idea to replace all of the locks in the home.
• Have a proper home inspection done by a professional. In some instances, the seller may have had a home inspection completed, but in any instance, you should have a home inspector that you hire complete a home inspection also. Expect to pay between $300-$1100 depending on the size of the home. They are more thorough and they are able to point out problems that you may not have noticed.
Lastly, make sure that you are working with a reliable real estate agent – they will make the process of buying a home a lot easier.