The hidden costs of buying a home
As a first-time homebuyer, you may be unaware that there are other expenses you need to budget for on top of the asking price. But there are many other costs associated with home buying. Knowing about these potential hidden expenses can help you financially prepare for your big purchase. Here’s a list of what you’re likely to encounter:
Home inspection. It’s always a good idea to pay a professional home inspector to look for any potential problems with the home.
Appraisal. Your lender will typically expect you to pay for an appraisal to ensure the property value is correct and the home is really worth its selling price.
Taxes. In addition to the ongoing property taxes all homeowners pay, you may incur prorated taxes on your new home, or real estate taxes charged by your state government.
Survey. Many lenders require that you pay for a survey, which involves determining the true boundary of the property.
Title search and title insurance. Your lender will hire a company to examine municipal records to determine the legal ownership of the property, and whether there are any outstanding liens. They will also take out a policy to insure against errors. As the buyer, you may be responsible for both of these costs.
Private mortgage insurance (PMI). If your down payment is less than 20 percent, you typically have to pay PMI. This added cost is usually rolled into your monthly mortgage payment.
Legal fees. Most states require attorneys to be a part of the home buying process. The legal fees are added to your closing costs.
Adjustment costs. Sometimes the buyer must reimburse the seller for any prepaid taxes or utility bills.
New furnishings. An often-overlooked expense when buying a first home is the cost of buying new furniture, appliances, window coverings and other items.
These additional costs can add up, but don’t panic. Many of them can be rolled into your mortgage principal and included in the check your lender will provide you with at closing, so you won’t be faced with all the costs up front.
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