Thinking about buying a home? Saving for that big down payment? That’s fantastic. But, did you know there are a few other expenses you’ll have to cover?
While seasoned buyers are familiar with the additional costs of home buying, as a first-time buyer you might not be aware of these “hidden” expenses. To help you avoid being caught off guard, we’ve outlined four of the most overlooked up-front and post-purchase costs you could incur.
Home Inspection
First make sure any offer is contingent upon a home inspection. Once you’ve submitted an offer and the seller has accepted, you’ll want this inspection to make sure there aren’t any surprise issues. A cracked foundation. Hidden mold. Leaky plumbing. Those are all headaches you don’t want to face – at least not without prior knowledge.
To ensure you don’t get stuck with a lemon, hire a certified home inspector for a thorough examination. If they happen to uncover any structural, mechanical or other issues, you can negotiate repairs with the seller.
This is an up-front, out-of-pocket expense that’s non-refundable. If the deal falls through, that money is gone.
Is this a mandatory step? No. But it’s definitely a wise one. Spending a little extra now can save you a whole lot of money moving forward.
Appraisal Fee
When a lender gives you a mortgage, the home you are purchasing is your collateral. If you default, that’s how the lender will recoup their loss. To ensure they are protected, your lender needs to know the home you’re purchasing is worth the huge sum of money they are giving you. This is where an independent certified appraiser comes in. They assess the value of the home for sale. This is another up-front, out-of-pocket expense.
Closing Costs
In addition to your down payment, you’ll need an extra 2 – 5 percent of the home purchase price to cover closing costs. These costs include your loan origination fee and attorney fees. This is additional up-front, out-of-pocket expense.
Maintenance and Repairs
Even with a home inspection, there is a good chance your new home will need some maintenance and repairs. This is especially true over time. Every home has general upkeep costs associated with it. Even for those fixes you can do yourself, you’ll need to cover the cost of materials. Having a little extra financial wiggle room once the home is in your possession will allow you cover these expenses.
Ready to start the home buying process? The first step is to get preapproved.
