You’ve been obsessively scanning for listings that fit your budget. Calculating exactly how much you can afford (on a diet of more than top ramen.)
Hopefully you took into account the hidden costs that come with buying a home. If you don’t know what that means – forget your current budget and get ready to recalculate.
Here are 10 hidden costs of buying and owning a home that you need to factor into your budget.
A general & vague term for all the fees you’ll have to pay before the home is yours.
While prices vary per transaction, expect to pay the following fees:
Escrow isn’t a made up word (although it sounds like one.) Paying for the escrow is usually mandatory for buyers in any real estate transaction. You’ll be asked to pay the escrow account upfront, which covers expenses like property taxes and insurance.
Some lenders require an excess amount of money to remain in the escrow account. Make sure to talk with your agent and budget for paying in escrow when determining your price point.
Property taxes may be bundled into the cost of a home’s mortgage – so it’s important to calculate the cost separately when setting a budget.
Property taxes are dependent on the location of the home, so do your research on costs in the area (especially if you’re moving to a new zip code.)
Earnest money is basically a security deposit on a house. The seller will likely require you to pay an Earnest money deposit on the home before going forward with any other steps in the transaction.
Usually, you’ll get Earnest money back once the transaction is complete – or it will be put towards the final cost of the home. The purpose of Earnest money is to show the seller that you’re serious about purchasing the home.
If you choose to back out of the deal, you might not see your Earnest money again. Make sure to read any contracts carefully before you sign, especially if you are unsure about the home.
Homeowner’s insurance can fluctuate in cost, depending on what you need covered. It’s a required expense for every homeowner, so remember:
Depending on where you lived previously, your new utilities bill might come as a shock. For bigger and/or older homes, expect to pay more in monthly utilities.
Getting a home inspection to determine the home’s efficiency is key to avoiding massive utility bills.
You can ask for a lower sale price to cover the cost of energy efficiency improvements.
Even if you don’t have kids in school, paying school taxes isn’t optional.
Make sure to do your research on the school districts that you might be moving to. Tax prices depend on how desirable the surrounding school district is to families.
If you have kids, or are planning to have them, paying higher taxes for quality education might be something you’re okay with. Quality schools usually mean safer neighborhoods, making the extra tax worth paying.
Better school districts have higher school taxes, so account for these additional taxes when budgeting.
Renting a moving van or hiring movers isn’t cheap, and the majority of people have to pay for one of the two (if not both.) At bare minimum – moving costs include:
If you didn’t hire movers, tack on the cost of beers for your friends and family (that were basically forced to help you.)
Even the best lenders charge interest rates – that’s just how business works. Shop around for a lender with the lowest interest rate before you apply for a loan.
Unless you have a filthy rich uncle that’ll lend you a couple hundred thousand dollars – interest free – you’re gonna have to pay interest.
Having a good credit score can result in lower rates, saving you thousands over time.
Set a home buying budget that doesn’t max you out. You’ll want to make changes and updates as your taste changes, which cost money.
Becoming a homeowner includes paying for regular upkeep and maintenance. Set extra funds aside for:
Buying a home isn’t one set cost. Budget for a couple thousand less than your maximum spend, because these hidden costs add up quickly.
The brutal truth – buying a home is an investment, and you’ll be spending money long after signing the final contract.
Face these hidden costs upfront to make a smart investment AND find a home that won’t break the bank.