Most buyers have a specific budget they use to set boundaries when looking for a new home. The problem is that there are many hidden costs that are worked into the loan, which may increase your monthly payment if you do not plan for them. Rather than getting a big surprise on their first mortgage statements, homeowners should be aware of the hidden costs involved in buying a home and how these will figure into the budget.
Some counties require that you prepay your taxes at closing. Many homeowners set up an escrow account that collects money each month, and that account pays the taxes every year. If your down payment is lower than 20 percent, it is required that you have an escrow account. If you do not have an escrow account, you can expect to pay your property taxes each year out of pocket.
2. Home inspections
Before a bank is willing to loan you money for a home, they want to know if that home is in good shape and worth what you are paying for it. Your mortgage insurer may require a home inspection before you can close on the house. This is beneficial to you because you know exactly what you are getting, and a home inspector is trained to look for those hidden problems that the untrained eye will not catch. An inspection may run several hundred dollars and can often be figured into your closing costs.
3. Moving costs
Even if you choose to move everything on your own or with the help of friends and family, you can face charges that you did not see coming. Supplies, moving vans and gas to run them can put your moving costs at several hundred dollars. It may be worth getting a quote from a local moving company to determine if it is cost-effective to hire someone or to do it yourself.
4. Appraisal fees
Before you can buy a home, an appraisal must be done on it to determine the true value of the home. The previous owner may have just picked an arbitrary number that does not fit what the home is worth. An appraiser will come to your house and observe all the relevant information to pinpoint the exact cost of your home so you know you are getting a fair price. These also run several hundred dollars and are often included in the closing costs.
Be ready for anything
The process of buying a home can be exciting, but it may be beneficial to consult an attorney with any questions you have before taking the final plunge and signing any legal documents.