Buying a home can get expensive. Just because you have a fully-funded mortgage, doesn’t mean you can relax when it comes to saving up money. There are quite a few upfront costs of buying a home that can catch people off-guard. Inform yourself now so you can be ready.
I’m sure you’ve heard of a down payment and know what it is, but for those who don’t: a down payment is a percentage of the home cost that the buyer pays upfront. Many lenders won’t provide a mortgage unless the buyer has some skin in the game (via the down payment).
You typically want a down payment that’s 20 percent of the purchase price, but if you can’t, there are some loan programs that allow you to have a smaller down payment percentage. Just keep in mind that if you do have one that’s smaller than 20 percent, you’ll likely have to pay a Private Mortgage Insurance premium each month on top of your mortgage payment.
Closing Costs consist of a few different fees. These can include real estate attorney fees, taxes, title expenses, mortgage processing fees and more. These usually only cost a few thousand dollars, but it depends on where you live and how much the purchased home is worth.
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Home inspections and home appraisals are also payments that buyers will may upon a home purchase. Home inspections allow the buyers to get out of the deal or negotiate further if an issue is found in the home. Home appraisals will tell you how much the home is worth. Again, the costs will differ per situation. Sometimes these expenses are also included when people mention “closing costs.”
Once you have the home in your name and the seller has moved out, it’s time for you to move in. This can also get a little pricey. Depending on how far away you’re moving from and how much stuff you’re bringing to the new home, it could be a substantial expense.
Just because you’re now moved in, doesn’t mean costs go away. You not only have your monthly mortgage payment, but you’ll also be responsible for HOA fees (if applicable), taxes and any and all costs of maintenance and repair in the home.
Having a little bit of cash put away for these unexpected events would be wise. It can be small to start (since you just spent so much money getting into the home), but start adding to it as you go, so you’ll be more financially stable when something does happen.
Although there are many costs of buying a home, it doesn’t have to surprise you. Do your best to be informed and ready for it. It may be a lot to think about and prepare for now, but when you get in that dream home, it’ll all be worth it.
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If you want to learn about some financing options, or if you’re looking to get pre-qualified, contact Parker Turk at Sun American Mortgage Company: 602-616-3774.
For some other tips on home buyers costs, check out these articles:
Home Finder: “Saving for a Home: Preparing for the Upfront Costs”
Bankrate: “Calculate the Costs to Buy a Home”
U.S. News & World Report: “The Hidden Costs of Buying a Home”
Nerdwallet: “What it Costs to Buy a Home”