When buying a new home for the first time, you are going to be reading through and signing a pile of paperwork like never. The paperwork is all standard and most of it is boilerplate, but it is still a lot to process. What is also a lot to process are all the additional costs. You will be aware of the actual purchase price and commission charge but are you also aware that there are several “additional costs” that appear to crop up at every turn?
The following are what you need to add to your budget when buying a new home:
As you make the transition from renting an apartment to be a homeowner, you will find yourself open to possible adjustments in your taxes. Homeowners do receive some tax breaks, but property tax is not one of them. This is something all homeowners must pay. The amount will vary and depends on the value of your home and the area where it is located. You should get a rough idea of the property tax charge for your new property before you close. The tax will not be due for payment immediately. However, it’s a good idea to put the amount aside so you will not need to scramble around to come up with that expense.
You are going to hear a lot about closing costs from the closer you get to do your closing. It will be the total sum of a lot of small fees such as covering the home inspector or the recording of the deed. There is also a notary, surveys, and title insurance fees that may be part of the closing. All the costs of closing can be included into your home loan. Of course, you have the option to pay them upfront if you want to. It will just mean less money to spend on new furniture.
The balance you might save between paying a mortgage versus paying rent will help cover the homeowner’s insurance premium. For as long as you are paying a mortgage you must have this type of insurance coverage. If you purchase a home in a designated flood, fire or other disaster zones, then there is a good possibility that you could end up paying higher premiums.
This is a small amount of money paid to the homeowner to confirm how serious you are about purchasing their property. The amount paid can be between five hundred dollars and up to one thousand dollars. The good news is that this amount can be offset against the purchase price. However, if the deal did not proceed because you could not secure the financing, then the earnest money would be gone for good.
The above additional costs should not put you off from buying your own home. You just need to make sure you include them all in your budget so that you are fully informed.