Table of Contents Hide
On a surface level, buying a home is a huge investment and like all investments, there are certain questions you may need to ask yourself.
Do you intend to go for a new home or an old one? What is the cost of going for a new home? The maintenance cost and many more. These are some factors most home buyers consider before making that life-changing decision.
Not to worry, this article has compiled a wealth of information on the real cost of buying a home and everything you need to know. Let’s get started!
Expected Costs of Buying a Home
There are certain costs you may need to know and except when you want to buy a home. Below are some of these costs:
1. Down Payment
Down payment is an initial payment made before the purchase of the property. Most down payment is an advanced price concerned with most mortgage loans.
However, down payments are within the range of 20% of the total price of the home. Therefore, when next you think of buying a home, determine how much money you can put down before the actual purchase.
2. Month-to-Month Mortgage Payment
Your month-to-month mortgage payment is another cost you may need to consider before buying a home. It is subdivided into three:
- Principal: This is a portion of your mortgage payment that goes to reduce the balance of your loan monthly.
- Interest: This is a rate charged on the loan by the lender. Your principal and interest are amortized to be paid off over the loan term.
- Property Taxes: There can also be called real estate taxes. These are taxes charged by your country’s taxing authority and can fluctuate depending on changes in the value of your property.
3. Appraisal Fee
This is the amount of loan you will receive from your lender depending on the appraised market value of your home.
Appraisals are used in sale-and-purchase transactions to determine whether the home’s selling price is appropriate considering its features and condition.
This includes an inspection of the properties and a comparison of recent sales in similar real estate within the locality. The average price for an appraisal varies from $300-$400 depending on the type of home you plan to purchase as well as the location.
4. Home Inspection Fee
When you’re buying a home, it’s always a wise idea to get a home inspection. During an inspection, someone goes through the home to see if there are problems with the electrical, air conditioning, heating, plumbing, floors, ceiling, walls, and other parts of the home to ensure that everything is functional.
The cost of a home inspection might range from $300-$1000 depending on the size of the home and what is involved in the inspection.
5. Deposit Fee
Once your offer has been accepted by a seller, you’re required to pay a deposit of some percentage of the purchase price depending on the location.
This tells the seller that you’re serious about the offer and would want to see it through. If for any reason the offer doesn’t go through, the seller keeps the deposit as compensation for taking the time to go through the process with you.
Note: The deposit fee is not the same as down payments.
6. Title Insurance
This is a form of insurance that protects mortgage sellers and homebuyers against financial loss with a title that may arise as a result of the transfer of ownership of property.
This insurance also protects you from heirs/relatives of the previous owner who may try to have a claim on the property.
When you purchase title insurance, you pay someone to conduct public research to know if there is a third party besides the seller that has a claim to the property.
7. Legal Fees
These are fees paid to a real estate lawyer to review all the legal documents and paperwork such as the agreement of purchase and mortgage payments. The lawyer also ensures there are no claims on the property.
8. Credit Report
When you apply for a loan, your lender requests your credit report to see your track record of repaying loans in the past as well as your debt-to-income ratio. The cost of pulling your credit report is less than $30 and it’s added to your loan costs.
9. Utilities and Property Taxes
In some cases, the previous owner of the home might have paid the utilities or property taxes in advance. When your offer is accepted, you pay a fee called adjustments.
This is to ensure that the previous owner only paid for the duration they owned the property.
10. Home Insurance
This is a form of insurance policy that covers loss or damage against your home, furnishings, and other assets in the home. This insurance provides indemnity against accidents like fire outbreaks and natural disasters in your home.
When applying for a loan, you’re expected to provide a homeowner’s insurance policy before the loan is granted.
The cost of a home insurance policy can vary depending on the amount of insurance, coverage, and location.
11. Moving Cost
This is the cost incurred for moving your properties to your home and it can vary depending on the services of the moving company.
You can rent a truck, pack your boxes, personally load them into the truck and drive or you could hire a moving company to assist which will cost more depending on the types of properties you’re moving, the time of the year, the distance of your action and moving services you require.
Buying a home can sometimes be a tasking activity however this article has simplified the process for you. All you need to know is the real costs of getting one to avoid surprises when you’re about to close that deal.
Now you know about the ins and outs of the transaction by maximizing the resources made available to you in this article, it would be a great experience for you and your family to make that dream home a reality.