When you are buying a home, you are fixated on one price and that is the big one that you may be paying for over the next 30 years. While that is definitely the most important price, don’t let that be the only thing you think about. There are many other expenses you will encounter when purchasing a home and they could add up significantly. If you haven’t budgeted for extra items, don’t let them sneak up on you and cause your household budget to become unrealistic. Don’t be surprised by the necessary expenses you will encounter throughout the home buying process.
Here are some of the additional expenses you should expect when you buy a home. Take these expenses into account before you buy so you aren’t surprised by them at closing.
Closing costs. Closing costs are part of every home transaction and can add up to thousands of dollars on top of the price of your home. In some cases, your lender may allow you to finance some of your closing costs along with the purchase price of the home and you may also negotiate with the seller to pay a portion of your closing costs as part of the contract. Either way, expect closing costs to total 2% to 4% of the price of your home.
Taxes and insurance. Real estate taxes vary greatly depending on the value of your property and the tax rate where you live. While property taxes are frequently paid via your escrow account and therefore added to your monthly mortgage payment, this will increase your monthly payment and may push that payment beyond an amount you are comfortable with. Insurance will also be added to your escrow account so don’t forget it either. You will definitely need homeowner’s insurance and could need other coverage depending on the location of your home. Make sure your monthly payment leaves room for these items.
Homeowners association fees, condo fees, and utilities. HOA and condo fees are normally paid by your landlord when you rent, as are many utilities such as water and garbage. You will be responsible for them once you own your home. Be sure you have room in your monthly budget for these expenses.
These extra costs can add up, but don’t let them scare you off from buying your own home. As long as you budget for these added expenses before you buy, you won’t have to worry about getting in over your head.
Even if you aren’t buying your first home, it’s easy to forget about some of these items when you get excited about a new home. Take a little time to plan your household budget before you get too far into the homebuying process so you aren’t surprised by anything after you fall in love with your new home.
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