Homebuyers know they are preparing for a down payment, but this is not the only cost to consider when buying your first home. The costs of buying a house can accumulate quickly - and often surprisingly - so it is important to know and prepare for it before signing on the dotted line.
The following seven costs often surprise first time homebuyers - but only if you are not ready for them.
First and foremost, you have to prepare for moving expenses, whether residential or commercial, so you do not spend more money than you need: first of all - move your bed, furniture, dining table and other personal matters.
Serious money acts as a deposit on your home purchase application. It tells the seller that you are a committed and trustworthy buyer. If the contract is concluded, the money will be allocated to the down payment and closing costs. And if the contract does not pass, there are plenty of contingencies in place to make sure you get the money back. Just deciding that you're not interested in the house is probably not a legitimate reason to give up your contract. Therefore, carefully review all contracts before depositing serious money. These costs are in addition to moving expenses and must be calculated.
Tip: You should keep between 1 and 2% of the total purchase price in the form of serious money. This will help speed up the processing of your application, an important factor as the housing market becomes more competitive for buyers.
2. Evaluations and inspections
You can not avoid evaluations and inspections, and you should not want to. The valuations guarantee a precise asking price, offering some protection to you and your credit institution. Buyers are usually responsible for the valuation - often as much as several hundred dollars - but you may be able to negotiate those costs with the seller.
Home inspections are separate from the assessment process and provide additional security for home buyers. They can prevent unexpected surprises such as a termite infestation or leaking pipes. Since these issues can influence your purchase decision and give you bargaining power, you will want to know more before concluding. In some cases, you can ask the seller to address the concerns before concluding or negotiating for a better price. The buyer usually pays for the home inspection as part of the closing costs.
Tip: If you can, attend the house inspection to understand the issues as thoroughly as possible before trying to negotiate the terms of your contract.
Insurance can be complicated, but you can divide it roughly into three categories: home insurance, mortgage insurance and supplemental insurance. Every owner needs home insurance. It helps pay for repairs or rebuilding the house, covers personal belongings and protects you against liability claims. Many credit institutions will ask you to buy home insurance - and pay for a year of coverage - before approving your loan.
If you can deposit more than 20 percent on a house, your credit institution will probably not ask you to buy mortgage insurance. If you need to purchase mortgage insurance, the fees will be added to your monthly mortgage payments, closing costs or both.
You do not need to buy additional insurance, but it may be a good idea if you live in a flood or earthquake-prone area, as these are usually not covered by home insurance policies standard. Do not forget to work with a team of movers who have good insurance to insure your property!
Tip: Work with an insurance agent to get the best rates on all your insurance needs. You may be able to cancel your mortgage insurance after paying off a portion of your loan.
4. Escrow charges and accounts
Escrow agents - often lawyers or representatives of securities companies - serve as independent third parties to ensure that the closing procedures go smoothly and everyone is paid. Unfortunately for homebuyers, this means that the escrow agent must also be paid. Escrow charges are generally split between buyers and sellers.
Separate escrow fees, your credit institution may require an escrow account to pay your property taxes and insurance. This account guarantees that these fees are paid on time, which is why many lenders require the account. The credit institution will estimate the annual cost of your insurance and taxes, divide the estimated annual total into monthly payments and include these costs in your monthly mortgage payment.
At the end of the year, your lender will adjust the amount based on taxes and actual insurance bills. If you have paid too much, you will receive a refund; If you have not paid enough, the payments will usually be spread over the next year. If you decide to skip the escrow account, you will be responsible for both payments yourself.
Tip: Property taxes can be an unpleasant surprise, so research before you commit to a purchase. A licensed real estate agent can help with the job.
If you rent a house or apartment before, you may have to pay a connection fee for electricity or gas. When you own your home, you will pay installation fees and monthly bills for each utility - electricity, gas, water, sewage, garbage, recycling, television, and the Internet. Utility companies will check your credit history and may ask you to pay a deposit or obtain a letter of guarantee from someone who agrees to pay your bills if you can not.
Tip: Talk to your new neighbors about who they buy utilities from. Some places have only one water and gas supplier, but if you live in a place with multiple providers, you should compare rates to get the best.
6. Residential Improvements, Maintenance and Repairs
Even though home sellers cover major repairs, as a basic problem, you can still end up with the expense of a new HVAC system, roof, or water heater after closing. Other expenses will be self-inflicted, of course, as cosmetic improvements for cabinets, floors or walls. And if your new home has a yard, you'll need to buy a lawn mower and a weedeater or hire a lawn and landscaping service, too.
Tip: Make a list of improvements and categorize them as needed. A new HVAC system may be essential, while cabinets and other cosmetic upgrades may wait until next year. If you prioritize repairs, you can keep costs down, not to mention recovering some of the investment if you sell the house later.
7. Furniture and appliances
Do not expect your new home to be equipped with all the appliances you saw inside. Each market is different, but you'll want to discuss all the devices with your seller to make sure you're clear on what comes with the house and what does not work. At a minimum, you will probably need to buy a new washer and dryer, if not a refrigerator and a stove. Things like ceiling fans, light fixtures and air conditioners - appliances that you might consider "fixed" - will not necessarily be there for you when you move in unless they are explicitly part of the contract. move by your moving team on the big day!
Tip: As with repairs, you must prioritize furniture and appliances as needed. If you buy energy-efficient appliances, keep the receipts. You can often claim expenses on your tax return.