Buying a home is a big decision. For most people, a house will be the most expensive thing they invest in during their lifetimes. However, it may be even more expensive than you first assume. The price you agree to pay for a home via a mortgage is not the true total cost. There can also be many hidden costs you should be aware of. These can add up and become a financial burden if you’re not prepared for them. With that in mind, here is an overview of some of the hidden costs of buying and owning a home.
A house inspection isn’t required to purchase a home. In fact, most sellers and builders would probably prefer that. However, it’s never a good idea to go without one to save money. A house inspector might be able to spot shoddy workmanship in the home or damage that you weren’t able to notice without a keen eye for such issues. The information you receive is very important. You can use it as leverage when negotiating with the seller to make sure the cost to make the repairs needed is reflected in what you pay for the home. Overall, the inspection should set you back at least a few hundred dollars if not more.
An even more considerable cost you must certainly plan for is property taxes. Just because you can afford a mortgage does not mean you can necessarily afford the home. If the house is located in an area with high property taxes, it may be more than you can afford to pay. Certainly make sure to find what the yearly property taxes are in a place before you start shopping for homes. Make sure to add the total amount divided by 12 to your monthly mortgage payment to see if living there is doable. Also keep in mind that property taxes are likely to increase each successive year.
If you rented before, you may be familiar with renters insurance. However, homeowners insurance will certainly be a more significant investment. The property of course is completely your responsibility. You have no landlord to fall back on. You should also be aware that certain factors could result in you having to pay more for homeowners insurance. If your home is older, your homeowners insurance premiums are likely to be much more expensive. That is due to the fact that things breaking down and needing repairs is much more likely in an older home.
You may also be required to buy additional coverage if you’re in the flood plain of a river or near a fault line prone to earthquakes. Flood and earthquake insurance has to be purchased separately at an additional cost.
Many people may assume that their homeowners insurance will cover all repairs. However, that is unlikely the case. Even for repairs that would be covered, you will first need to pay a significant deductible that could be a thousand dollars or more. A house will more than likely require repairs over the course of the year. Plumbing, heating, air conditioning, electricity and other systems in your home are not designed to last forever.
One way you can protect against these kinds of costs is by obtaining a home warranty. Such a warranty can help fill the gap left by homeowners insurance in case important systems or appliances in your home suddenly break down.
When purchasing a home, you will also have to incur all kinds of fees. You must have the money available to pay these expenses before you own the home. The kinds of fees you can expect include government deed recording charges, the appraisal fee, a credit report fee, title service fees, the lender’s origination fee and a tax service fee. There can be many more as well. Certainly factor these kinds of fees into what you need to save to make the purchase along with the down payment and other initial costs.