Buying a home for the first time is expensive. Just to save for a down payment could take months, even years, to save up for. The last thing you want to find out about is unexpected expenses that could unravel your home sale, or at the very least, add financial stress to what should be a milestone celebration.
To keep from happening any last minute surprises, go into your first-time home-buying experience with an open mind. And to avoid unexpected expenses after buying your first home, first understand what some of them might be.
Once your offer is accepted, your lender then begins to crunch numbers and starts the paperwork process. They will give you a detailed list of what your closing costs are, based on your home, area, and current fees. Closing costs will generally run you anywhere from an extra 2-5% of the home purchase price. Here’s what these costs usually include:
• Lender fees include administrative costs, to wire transfer fees, and even fees for pulling up your credit report.
• Attorney fees: Also known as title fees, these are government filing fees, escrow fees, notary fees, and any other fees associated with transferring the deed over into your name.
• Appraisal fee: A home appraisal can be a big expense that can cost you several hundred dollars. Lenders want to make sure that your home appraises for the sale price.
• Escrow fees: Property taxes and insurance could be required to pay in advance, which is put into an escrow account right from the beginning.
• Interest: There will be interest that’s prorated from the date of your closing to the first of the following month that you’ll be required to pay.
Monthly mortgage calculators may be able to tell you what your monthly mortgage payment is, including interest. The problem is, they don’t always include the taxes and insurance, though. Your taxes will vary depending on the value of your home and especially based on where you live. The average U.S. homeowner pays approximately $2,000 a year, and things like homeowners insurance vary quite a bit.
When renting, if your appliances break, it’s a true pain, but it’s at the expense of your landlord. As a homeowner, you have to pay for the repair or replacement yourself.
Depending on what you’re used to paying for your gas, electric, heating, and water bills, it won’t necessarily be higher when you buy a home, but most of the time, it is. In many cases in a rental situation, your landlord will cover the bill for some expenses like trash pickup or water that you’ll have to pay on your own as a homeowner.