While every home displays its set price, there are many other costs around it that potential buyers need to consider. In addition to what you see on the price tag, other expenses associated with the home will show up when you’re buying the home and making monthly payments afterward. Here are some of the costs to keep in mind when buying your new home.

One-Time Costs to Consider

The Down Payment

The first big cost you’ll face when purchasing a new home is the down payment. Traditionally, you will need to make a 20 percent down payment on a new home, but if you are unable to afford this, you may be able to receive a loan with less upfront money. The problem with getting a loan is that you will ultimately face an increased cost of lending along with an increase in monthly payments.

If you want to avoid the pain of a large down payment, you’re better off paying as much as you can to cover the down payment while saving the rest of your funds for the costs associated with moving in. Move-in costs could include any furniture you purchase, initial repairs, and other costs to touch up the home such as a new paint job. State assistant programs can offer additional help if you need it, whether you get assistance through forgivable loans or grants.

The Cost of Closing

Another one-time cost you’ll need to pay is the closing costs, which are fees that third parties and lenders charge to close real estate transactions. Depending on the price of the home, these costs could range from hundreds to thousands of dollars.

Prior to covering these costs, your prospective lenders will send you an official Loan Estimate that details closing costs to help eliminate any unpleasant surprises. Keeping these costs in mind, you can try to find lower fees with other lenders or request lower fees when negotiating with them.

Long-term Expenses

Apart from the down payment and closing costs, there are several ongoing costs that you’ll likely pay for years.

Mortgage

Monthly mortgage payments are among the most predictable payments that homeowners will make on a house, but many individuals neglect to consider other monthly costs they’ll need to make in addition to the mortgage.

The Consumer Financial Protection Bureau recently found that just under half of home buyers don’t shop around for home loans before buying, which can result in inflated monthly payments and lost money over time. The fact is that many buyers can save hundreds per borrower within the first year of a multi-year mortgage if they take the time to look for the best mortgage rates.

Mortgage Insurance

If your down payment falls below 20 percent, you will need to pay mortgage insurance comprising around two percent of the annual loan amount. Mortgage insurance is intended to keep the lender protected if you choose to default on a loan.

In addition to premiums, you may need to pay an upfront amount, which will combine with your loan payment until the balance on the mortgage is less than 80 percent of the value of the home. Once the balance dips enough, the lender may cancel those mortgage insurance payments.

Property Taxes

Property taxes can vary greatly depending on where you live. To make sure you have a good idea of how much property taxes will account for on your monthly payments, consult with your real estate agent.

In many cases, property taxes may increase as local governments attempt to cover municipal expenses or projects. Also, if the home’s value increases because of the local market or certain renovations, you may need to pay more in property taxes.

Hazard and Homeowner’s Insurance

Both homeowners and hazard insurance will also vary by region and state and will account for part of your monthly payment. Annual premiums for homeowner’s insurance are often in the thousands, while hazard insurance costs will depend on the area’s specific risk factors due to local weather and other conditions.

Consider combining auto and life insurance with homeowner’s insurance policies if you want to minimize insurance expenses.

Homeowners Association, Condo, and Co-Op Costs

Whether you’re purchasing a condo, co-op, or a home in a planned development that includes a homeowners association and shared spaces, a monthly assessment will appear along with mortgage payments. The total amount will help cover any improvements made to the community or complex, including structural upgrades, aesthetic improvements such as landscaping, or utilities.

Keep in mind that if you live in an urban area, condo assessments can be as costly as your monthly mortgage.

Utilities and Other Costs

Similar to renting, you also need to consider the cost of utilities and other expenses such as maintenance or landscaping. You might be able to adequately plan ahead for some of these expenses, but you never know when a plumbing disaster or unexpected inconvenience might occur.

To make sure you’re prepared to handle any potential disaster or cover other unexpected expenses, it’s always a good idea to have a “rainy day” fund available, which should comfortably cover any costs that insurance won’t cover.

When buying a home, taking all of the costs associated with it will help you determine how much you can spend and minimize the potential stress of becoming a new homeowner. If you need assistance with setting aside funds or predicting all of the costs you may need to cover, consider speaking with local real estate agents, financial advisors, and other experts who can help.

This is a unique website which will require a more modern browser to work!

Please upgrade today!