Hidden home buying costs quickly add up to a whole lot. And, they do so seemingly out of nowhere. Before you know it, you’re pulling out your wallet, time and time again. A few bucks here, some more money there. It all raises the cost of purchasing a home and these aren’t necessarily dirt cheap. In fact, they can easily add up to thousands or even tens of thousands of dollars in a very short amount of time. So, you need to really be prepared because it’s just part of the home buying process. (Which can take years, when including saving for a down payment and other preparatory steps.) Read on to learn about the biggest home buying hidden expenses you’re most likely to incur.
The Property Purchase Process
First, let’s take a moment to lay out the property purchase process. As stated, the home buying journey can easily last several years. It starts with being vigilant about your credit score. It’s best to only have a few open accounts and keep the balances low. Paying off those balances on time or before they’re due is a great habit to get into. Also, you’ll need to periodically check your credit report. You can do this free of charge, once a year by going to Annual Credit Report.com, getting all three bureau files.
“…almost everything we buy has a hidden cost. You buy a toothbrush for a couple bucks, and since you’ll have to purchase toothpaste, the ownership cost of a toothbrush is more than $2 – especially if you throw in a toothbrush holder. Obviously, the hidden costs of buying a house are far more complex. And if you aren’t prepared for them, you may come away from the experience feeling as if you’ve been kicked in the teeth.” —US News and World Report
Leading up to the time you start house hunting, you should save for a down payment. Currently, there are mortgage products which only require a down payment of 5 to 10 percent. However, there are other options. And, a 20 percent down payment will usually avoid PMI or private mortgage insurance. (Typically PMI ranges from 0.5 percent to 1 percent of the entire loan amount on an annual basis.) PMI is insurance for the mortgage lender — it’s not there to protect you, so it’s worthwhile to have a larger down payment to prevent an extra expense.
Top Home Buying Hidden Costs
The actual home buying process starts in earnest when you pre-qualify and then, more importantly, get pre-approved for a home loan. The former is a general, cursory process, while the latter informs you of how much you can really borrow. Then, you’ll look at houses and narrow down your options to a short list. Once you’ve found a property you like, these are the next upcoming home buying expenses:
- Moving expenses. Of course, you’ll have to move into your new house and that’s going to cost something, even if you have a bunch of friends with vans, pickup trucks, and other transportation. In general, hiring a moving company ranges from a few hundred dollars to a couple or few thousand. It depends on how much and the distance.
- Earnest money deposit. You’re first step toward securing a house is through a good faith deposit or earnest money deposit. If you submit a purchase offer to a seller, you’ll be required to demonstrate you’re serious and this is how that’s done.
- All the necessary inspections. Here in Florida, you’ll need a home inspection, pest inspection, and a wind mitigation inspection. These are usually a few hundred dollars each and one or more might be required to get final mortgage approval.
- Needed repairs and improvements. There’s no such thing as a totally problem-free house. Be prepared to spend some money on repairs and improvements.
If you’re going to buy a house, please don’t hesitate to phone me at 407-616-7286, I’ll be happy to speak with you.