Is buying a home on your radar? Becoming a homeowner is such an exciting prospect! So, what do you need to know before getting serious about finding a home and signing the papers? You are probably intrigued by the cost of a mortgage payment usually being equal to or less than a rent payment. There’s more, however, to buying a house than just the mortgage payment. Learn more about the hidden costs of purchasing a home.
You’ve probably heard of closing costs, but you may have underestimated how much they can cost you. Closing costs, on average, equal about 2% to 5% of the price of the house. These include things like the appraisal, loan origination fee, recording fees, home owner’s insurance premium, title taxes, property taxes, county taxes, and more.
In many sales, the seller will help pay for some of the closing costs, but this is not always the case, so plan as if you will not be receiving any help.
When you make an offer on a house and sign a contract, you will typically be asked to put down some “earnest money.” Earnest money is basically money that you give to the seller for them to hold the house for you until you’re able to complete the mortgage process. The amount needed will vary, but will later be applied to the cost of the house.
If you’re buying a house, you should always have it inspected before settlement. As a buyer, it is your right to hire a licensed inspector to look at the house to make sure there are no glaring or expensive problems. The sale of a house is usually contingent on a clean inspection, so if the inspector does find something very wrong with the property – like termites eating away at the foundation, for instance – you can back out of the deal.
Private Mortgage Insurance
If you are unable to pay at least a 20% down payment, you will have to have Private Mortgage Insurance, or PMI, on your mortgage loan. The amount varies based on the percentage down that you are able to pay, so the more you can put down, the lower your PMI will be. This cost is typically added into what you will pay each month along with your mortgage payment.
In some cases you will be required to put money into an escrow account to ensure all taxes are paid each year. This is usually added into the amount you will pay each month along with your mortgage payment and PMI payment.
This may not affect you very much if you are moving a short distance or are not taking a lot of stuff, but be sure to consider moving costs. A moving company can cost between $1,000 and $6,000 depending on the distance of the move. One way to save money here is to rent a U-Haul and have friends help you move.
Depending on where you move, HOA costs may be a new part of your monthly housing bills. HOA’s or similar groups are common in neighborhoods and condo and townhouse communities. Before putting an offer on a house, find out if there are HOA fees you will have to pay. Be sure to factor any fees into your monthly housing costs.
Think you can handle the costs of the home buying process? It’s worth it! If you’re ready to talk to a mortgage lender about getting the process started, Patriot can help! Chat with one of our knowledgeable and friendly mortgage team members by checking out our website, calling 717-709-2580, or visiting a branch. You’ll be on the way to owning your dream home in no time.