Buying a new home can be an exciting process. It’s easy to get caught up and not realize some potential costs that may come along. Today we’re going to talk about eight costs most home buyers do not anticipate.
Buying a home and budgeting for it can be challenging. While the down payment is the most obvious upfront cost that a buyer will have, there are other costs home buyers don’t typically expect.
#1 Earnest money – This is where if you’re a first time home buyer, the seller may request you to put up earnest money to secure the purchase of the home. Generally speaking, this is about a 1% of the sales price. You’re going to be putting this in escrow and it will be used and be credited to the overall sale price of the home. Keep in mind, most sellers are going to want you to have some money upfront so they know you’re serious about purchasing
#2 Appraisal Fees – Before your lender can approve your loan or your mortgage, a professional appraiser will have to be hired and their job is to calculate the value. What the property is really worth? And generally speaking, this can cost you between $300 to $700 to secure a home appraisal.
#3 Inspections – Now this is not required, but it is a good idea to have an inspection of the home. The inspector is the one that is going to tell you what defects are there. Is the AC working? Is the roof in good condition? Are the appliances in good condition? Generally speaking, it’s ideal for everyone to obtain an inspection, even though it’s an additional cost. Another good thing about this is if there is something wrong with the roof or the AC, you can go back to the seller and say, “Hey look, you either repair this or let’s take some money off the sale price.” and that will be used for repairing the home.
#4 Closing Costs – This should not come as a surprise but some home buyers are shocked at the amount that they have to set aside. This is generally 3% of the purchase price.
#5 Moving Expenses – Generally speaking, you can either do it yourself, what we call a DITY move, or you can hire a commercial mover to help move your furniture and stuff. Generally speaking, this could cost you up to a few hundred dollars, or in some cases a few thousand when it comes to moving. This is something you should price out before the actual day of the move.
#6 Utilities – A key thing here, if new buyers are not established yet with a utility service, it’s important to contact your utility company. You may be required to put down a deposit. Further, if you have poor credit, you may need to put additional money down for securing the utilities for your new home.
#7 Additional Household Purchases – You may have to purchase window treatments, blinds, and you may even have to purchase a few additional appliances like a microwave. You should always think about this and calculate that into your overall budget so you know that these expenses are coming.
#8 Maintenance and Repair – Once you buy your home, congratulations. However, repairs and maintenance is going to be an ongoing annual occurrence for your home. You should budget between 1% and 4% of the overall purchase and especially if you are purchasing an older home, you may want to bump that up an additional percentage. Just remember these are
expenses that are always going to be hitting you and coming to you every year.
Whether it’s an appliance breaking down, the AC breaking down or whatever the case may be, budget for it.
A good thing to do is think about enrolling in a repair program with your local utility company. Usually the rates are pretty reasonable and I would suggest looking into that. Contact your local utility to find out if they have the program and how much it will cost.
If you have any further questions, please give us a call at area code (651) 243-3367 or email us at mmhpllclaw.com.