If you’re thinking of buying a home, you’re probably wondering about all of the costs involved. In addition to the purchase price, you’ll also have to pay closing costs. These can add up, so it’s important to be aware of them before you start shopping.
Here’s a quick rundown of some of the most common closing costs:
Closing Costs
Closing costs are fees paid at the closing of a real estate transaction. This point in time is when the title of the property is transferred from the seller to the buyer. Closing costs are incurred by either the buyer or the seller.
Common closing costs include:
-Attorney’s fees
-Loan origination fees
-Discount points
-Appraisal fee
-Home inspection
-Credit report
-Courier fees
Title insurance policy
Title search fee
Transfer taxes
Mortgage Insurance
Mortgage insurance is required on all FHA loans unless 20 percent equity already exists in the home at the time of the loan funding. Regardless of the value of a home, most lenders require borrowers to purchase private mortgage insurance (PMI) if they cannot put down 20 percent on the value of a home.
Requesting that a lender waive mortgage insurance on an FHA loan is possible under certain circumstances. The lender must document that the value of the property has decreased since the original purchase price, making it unlikely that the borrower will be able to sell or refinance without paying a significant amount out-of-pocket.
Homeowner’s Insurance
Homeowner’s insurance is insurance that covers your home and belongings in case of damage or theft. Most lenders require you to have homeowner’s insurance if you have a mortgage, and even if you don’t have a mortgage, it’s a good idea to have this coverage to protect yourself from unexpected losses.
Your homeowner’s insurance policy will cover the structure of your home as well as your personal belongings in case of fire, wind damage, theft, or other covered perils. You can also purchase additional coverage for things like flood damage or earthquake damage if you live in an area where these risks are present.
Most homeowner’s insurance policies have a deductible, which is the amount you would need to pay out-of-pocket before your insurance coverage would kick in. For example, if you had a $500 deductible and $2,000 worth of damage to your home, you would pay the first $500 and your insurer would pay the remaining $1,500.
The cost of your homeowner’s insurance policy will depend on a number of factors, including the value of your home, the age and condition of your home, the amount of coverage you need, and the location of your home.
Property Taxes
When you buy a home, you will be responsible for paying property taxes to your local government. The amount of property tax you will pay will be based on the value of your home. Property taxes are typically paid on a yearly basis, and they are usually included in your mortgage payments.
Home Maintenance and Repairs
First-time home buyers are often surprised by the number of additional costs they must pay when they finally seal the deal on their dream home. From monthly mortgage payments and insurance to annual property taxes, there are a lot of new expenses to budget for. But don’t forget about the ongoing costs of maintaining and repairing your home — these can add up quickly if you’re not prepared.
Here are some of the most common maintenance and repair costs homeowners face:
-Roof repairs or replacement: $5,000-$10,000
-Gutter cleaning and repair: $200-$500
-Furnace or air conditioner repair or replacement: $1,000-$3,000
-Water heater repair or replacement: $600-$1,200
-Electrical system repairs: $500-$2,000
-Plumbing repairs: $500-$4,000
– Foundation repairs: $1,000-$5,000
-Window repair or replacement: $200-$1,500 per window
Condo or Homeowners Association Fees
If you purchase a condo or townhome, you will be responsible for paying monthly or quarterly association dues. These dues go toward the maintenance of common areas, such as the swimming pool, landscaping, and roofing. Dues may also cover trash removal, water, and insurance for the exterior of the buildings. Always check with the property management to find out exactly what is included in your association dues.
Moving Costs
The costs of moving house can be significant. Make sure to factor in the following:
-The cost of hiring a professional mover or renting a truck
-The cost of boxes and packing materials
-The cost of accommodations if you have to move out of your current home before your new one is ready
-The cost of disconnecting and reconnecting utilities
-Any pet boarding costs associated with the move
-The cost of changing your address with the post office and other organizations
Miscellaneous Costs
Occasionally, there are other miscellaneous costs that may be associated with purchasing a home. These costs can include:
-Home inspections: You may choose to have a professional inspector examine the property prior to purchase. The cost of an inspection is typically between $200 and $500.
-Appraisal: The lender will require an appraisal of the property to ensure that it is worth at least as much as the amount you are borrowing. The cost of an appraisal ranges from $300 to $400.
-Homeowner’s insurance: Lenders require that you purchase and maintain homeowner’s insurance in order to protect their investment in your property. The cost of homeowner’s insurance varies depending on the value of your home, but it is typically between $500 and $1,000 per year.
-Title insurance: This type of insurance protects you against any claims or liens on the property that you were not aware of at the time of purchase. The cost of title insurance is typically between $500 and $1,000.
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