Buying your own home is an excellent goal for many American people. It has its benefits and it does show a degree of personal success and prestige. Before buying a home, be sure that you look into costs that may be otherwise hidden, but may end up costing much more than you think. They include the following:
Fees for Settlement
Even before you own the house, there will be considerable costs due before or at the time for settlement. They include fees for survey and appraisals, inspections, title-based fees, loans, escrow, commissions, real estate agents, and more. Closing costs can be considerable and may range from about $3,000 to $8,000 for a $200,000 home.
Before signing on a home loan, be sure to get several estimates. Fees and interest rates will vary between lenders. Having a good credit score will make it easier to get a mortgage with better terms.
Property Taxes
The property tax on a home is based on the assessed value of it. This is different than the price you paid for the home and it means that your property taxes may fluctuate from year to year. Changes occur because of the fluctuations in home values in your area.
The area your home is in influences property taxes. This means that these taxes can be two to four times higher in more affluent areas than they are elsewhere in the country. During times of economic stress, some people have had to walk away from their homes because they were having difficulty paying the high taxes. Be sure you know what they are before buying.
Homeowner’s Insurance
Every lender will require that your home be insured. This helps them to be sure that your investment (and theirs) is well protected. Homeowner’s insurance does not cover all potential problems. If you live in an earthquake, flood, or hurricane area, it will be necessary to buy special coverage for that type of disaster. The insurance will only cover your home if the specific disaster is mentioned. You also want to be sure that there is enough coverage to enable you to replace your lost home or buy another one.
Private Mortgage Insurance (PMI)
When you buy a home, it is in your best interest to be able to make a downpayment of at least 20 percent. This will save you a lot of money in the long run. You will not need as large a loan, which also means less interest.
Without the 20 percent downpayment, you will be required to buy Private Mortgage Insurance (PMI). This insurance protects the lender in case you default on your loan. It is not home insurance. The cost of PMI is added to your mortgage payment, but it will disappear once you reach the 20 percent mark of the home’s value.
Maintenance
Buying a home means that there may be considerable costs in maintaining its value and beauty. Before you buy, make sure that you understand any problems with the house so that there are no surprises. You should have your own inspector look over the house (do not take the owner’s word for it or the word of an inspector they hired – who may be a friend).
Without a thorough inspection, you may find that you have to invest thousands of more dollars immediately. This can happen if there are problems with the HVAC system or furnace, roof problems, or termite problems. Bad wiring or plumbing problems can also be costly.