If you are thinking about buying your first home this coming spring, associated home purchasing costs may come as a surprise to many buyers. Here are many of the costs that should be factored prior to purchasing a home:
Down payment: Most home purchasers are aware of the down payments required to buy a home when a loan is being used. Most financial advisors recommend buying a home with a 20 percent down payment, but more or less can be applied. If less than 20 percent is used for the down payment, buyers will expect to see something called a PMI fee tacked onto the monthly mortgage payment. PMI is an insurance that protects lenders in the event that a buyer will not be able to make mortgage payments. The insurance protects the lenders, but a buyer must pay for it.
Costs during due diligence: Most buyers enter into a 10 to 14 day due diligence period after going under contract on a home. During this period, a buyer has the right to do more homework on the home which can include inspections, appraisals, and contractor estimates for necessary repairs. If anything is discovered during this period that is beyond a buyer’s willingness to handle, a buyer can walk away with no loss except the payments already made to inspectors and apprasiers.
We recently completed our due diligence period on a home we are purchasing, and we have spent over $2,000 on various expenses for the purchase of the home. We had the house inspected, a radon test completed, an appraisal on the home value, and a land survey that all exceeded $2,000. If something came up during any of those that was a deal breaker, the money would be a loss.
Earnest money: Earnest money is paid to the seller’s agent within an agreed amount of days after both parties agree on a contract. Overall, it is a percentage of your down payment that you fork over early to indicate to the seller that the buyer is serious about the contract. If you end the contract during the agreed due diligence, the money is returned. If you end the contract out side of the due diligence period, the seller is allowed to keep the earnest money.
Closing costs: Closing costs are costs that incorporate multiple fees including the real estate attorney and lender fees. The cost can vary, but they do typically cost in the thousands. Some sellers may agree to contribute closing costs towards the sales purchase, but it is not always a guarantee. Buyers should ask a loan officer expected closing costs to factor into a home budget.
Moving costs: Moving unfortunately is not cheap. Although moving is an easy part of the process to do it yourself, it is physically taxing. More than likely there will be some costs associated with moving, whether it is paying movers, renting a moving truck or providing lunch for friends and family who will help.
In addition, there are utility hook-up fees and there are supplies that may be necessary for a new home that was not expected. There will be furniture, window treatments and other items that will be desired for the home following a move. It is best to reserve some funds for expenses that will occur after a move is complete.
Writer Bio: Summer Bolte
I spend most of my time and days with my three kids, husband and dog. My kids frequently play near me as I garden, cook, DIY and volunteer. My most unusual paying job has to be feeding fruit flies in a research lab, and my most fulfilling job was being an oncology nurse for seven years.