Buying a new house is quite stressful and exciting experience. It’s important to be realistic about what you are expected to pay, when it comes to purchasing your new home. There are additional costs, beyond mortgage and insurance, all new homeowners need to factor in to their buying budget.
Below are some of the hidden costs that every new homebuyer should be aware of when it comes to purchasing their next home.
- Closing Costs:
These costs include a wide range of fees that are paid at the end of a real estate transaction. While this isn’t a comprehensive list, you can expect to pay fees including:
- Recording costs
- Document fees
- Cost of inspection
- Title cost
- Home warranty
- Sales brokerage commission
- Surveyance fee
- Lawyer fees
- Mortgage applications
You have to ask your realtor to go over what will be included in the closing costs to avoid any unpleasant surprises.
- Funding the Escrow Account:
“Most home buyers are unaware that they will be asked to pre-fund their escrow account to a level that will cover their first year’s taxes and insurance,” Nicole Davis, a financial adviser and the founder of Reliance Financial Services in St. Louis, Missouri. She further adds: “They may also be surprised to learn that most lenders require extra money to remain in the account. This is to help cover higher than estimated insurance and tax expenses in the following year.”
- Homeowner’s Insurance:
Similar to property taxes, homeowner’s insurance may be included in your monthly mortgage rate. It’s important to remember it’s there, even if they may be lumped in with other expenses, and that there’s a possibility it could go up or down depending on your coverage needs.
- Moving Costs:
It’s a one-time cost that you must consider.
“If you’re hiring movers, a same-city move will cost around $1,000. However, a cross-country move will likely top $6,000 for movers alone,” said Tony Drake, a certified financial planner and the CEO and founder of Drake & Associates, a wealth management firm in Waukesha, Wisconsin.
Some of the utility costs you’ll have to consider are the gas, electric, sewer, water, cable, internet and telephone. You’ll not only be making monthly payments on these, but it can be expensive just setting up the utilities.
“Some companies will charge a deposit,” Davis said. “Other providers may charge a service fee or connection fee for getting the service connected and started. These fees can certainly add up.”
- School Taxes:
School taxes will vary depending on the district. You may be happy to pay more in school taxes, if you have school-age children, if it means a quality education for your child. You must pay close attention to what school taxes you will be expected to pay if you do not have children in or heading to school. Depending on the area, it could vary quite a bit from district to district. This may be a factor in determining where you’re willing to move.
- Interest Rates:
Interest rates are never avoidable. But, having a good credit rating will likely result in a lower interest rate – which could save you big over time.