Buying a home for the first time? If so, congratulations! You’re about to embark on a new and exciting adventure by making one of the largest purchases you’ve ever made. As such, it’s certainly nothing to take lightly.
For a happy, stressless, and affordable home selling process, ample due diligence into the nuances of the transaction is required. When you approach buying your first home, being prepared is the best possible strategy. Purchasing a home is a long-winded and multistep process, and new buyers certainly won’t want to dive in blind. Having a rough idea of what’s hiding around every corner will put you in a great position as a first-time buyer.
This is especially true when it comes to the hidden costs of buying a home. Purchasing a home can easily turn into a bigger financial investment than you expected if you’re not aware of these sneaky fees, costs, and expenses – and there are quite a few of them to be aware of.
Here are some important home buying tips to keep in mind as you shop for your dream homes.
What Are the Hidden Costs of Buying a Home?
There’s much more to buying a house than just the initial price. But, this isn’t common knowledge. Instead, most buyers learn through experience, which can be rough at best and devastating at worst.
Buyers, save yourself the worries and use this as a guide to identify 10 hidden costs and anticipate the expenses.
Closing Costs
Buyers should be thinking about the end of the transaction before they even begin. Closing costs are commonly left out of the home buying expenses equation for first time buyers – even though they’re a substantial bill. The average amount buyers spend on closing costs factors between 2% and 5% of the property’s value. You don’t want your budget to get maxed out on the last stage of the process. Make sure you’re thinking about closing expenses and saving in advance.
Interest Rates
A mortgage payment is more than just the principal amount – there’s interest too.
First-time homeowners can get caught up over the large principle and forget to account for the monthly interest payments on their loan that will be factored into their billing cycles. Interest rates vary between borrowers based on the creditworthiness of the homebuyer, so be sure to talk to your mortgage loan originator.
Earnest Money
Buying a home can get competitive. Sellers are often choosing between applicants, and buyers who want to stake their claim need to be prepared to put money behind their offer. Beyond the down payment, the earnest money is typically collected to prove to the seller that the buyer is serious about the purchase and is ready to stake their claim.
If competition arises, you’ll need to be ready to dish out the earnest money at short notice.
Inspections
Buyers need to be sure that the home they’re about to buy isn’t hiding any troublesome secrets behind the surface. Inspections are key parts of the buying process as they ensure that buyers aren’t going to run into unexpected problems down the line – but buyers need to be ready to front some of those costs.
Many inspections are required to be paid for by the buyer, especially when they’re requested inspection processes that go outside the norms.
First-Time Home Buyer Tips: Always Think Outside the Box
Not all hidden costs are so obvious. You need to spend money to make your home your own, and even the little costs can quickly stack up to add a significant chunk to the sales price.
Here are a few crucial expenses to keep in mind.
Moving Costs
Even after you’re past all of the ‘official’ costs of buying a home, there’s still the cost of moving. Whether you’re moving yourself or hiring a professional, you’ll want to set aside money to cover the expenses. Consider how much you need to move and how far you’ll be moving. And if you’re hiring a team, call several companies to find the best rates.
Getting Set Up
Making your house livable will also require a bit of spending. Everything from activating your utilities, paying for cable and internet, and taking care of lighting and HVAC in every room will cost money. Remember to account for these up-front costs.
Decor and Design
Interior design is what makes a home truly feel like it’s yours. Getting every room in order involves buying necessities, like furniture and lighting, but also the little things, like decor elements, are important to settling in.
Embarking on projects like painting or small renovations will also tack on unexpected expenses if you’re not prepared, so remember to factor in the economics of these projects when they come to mind.
Consider These Ongoing Costs of Owning a Home
How far are you looking into the future? When you’re thinking about buying a home for the first time, one of the best home buying tips is to stretch your planning farther than you think you’d need to.
Unfortunately, the ghost costs of homeownership don’t end when the sale is closed and finalized. Even after you make your purchase and settle into your new abode, there will be ongoing expenses that need to be addressed.
The biggest thing that new homeowners need to be aware of is the shift in responsibilities between renting and owning. Buying a home for the first time means that you’re opening the door to a new bracket of expenses that you’ve probably never had to worry about before. When you’re the owner, you can’t send a text to your landlord anytime a problem arises – because it’s your responsibility.
Operational Costs
A great example of this is utility and maintenance expenses that you don’t always pay for as a renter. Plumbing issues or a stalling HVAC will need to be paid out of your own pocket. This also extends into regular maintenance appointments for general upkeep. Besides the financial aspect, new homeowners will need to keep up on their property’s systems and make sure that they’re being well preserved.
Insurance
Homeowners insurance is another lasting expense. This commonly gets bundled up into the monthly mortgage payments, so don’t forget to add that into the equation when you’re mapping out those monthly bills. For reference, 2020’s average annual homeowners’ insurance cost in the U.S. is $2,305.
Taxes
Of course, we can’t forget to mention taxes. Another important thing to keep in mind is the new tax responsibilities that need to be covered by the homeowner (ie: you). This includes property taxes, but also school taxes collected by the local district. Being diligent with taxes is a must for new homeowners to maintain a clean financial record.
Preparation is the Key
Buying real estate can be stressful, so don’t tack on even more pressure to an already sensitive situation. Looking ahead and making sure you’re prepared is a must for all aspiring homeowners. Make your first time buying a home the best it can be by accounting for the hidden costs of buying a home.
If you’re ready to embark on the life-changing journey that’s buying your first home, click here to browse homes for sale in your area.
