For many of us, buying our first home is the culmination of a lifelong dream. It’s an exciting time–but it can also be stressful, with unexpected problems and costs to navigate.
We’ve put together a list of the “hidden” costs of homeownership. Some occur during the purchasing process, and some are expenses that come with homeownership. Keep these expenditures in mind when you are ready to start looking for your first home!
Earnest money. Once an initial offer is accepted on a home, the buyers are asked to make a good-faith deposit, roughly one percent of the sales price (although this could be as high as five percent). This is done to show that you are serious about purchasing the home and could be forfeited if you back out without cause.
Appraisals and inspections. Before your lender can approve the funding of your mortgage, an appraisal of the home’s worth will need to be done. Appraisals cost several hundred dollars; amounts vary based on the size of the property. Inspections aren’t mandatory but are highly recommended. A standard home inspection assesses the condition of the roof, wiring, HVAC and more. With the results of an inspection in hand, you can negotiate repairs or concessions from the sellers. According to homeadvisor.com, an inspection can cost anywhere from $200-475.
Closing costs. Even though closing costs come as no surprise, they do come with sticker shock for many first-time buyers! These costs can vary. Check with your lender to help estimate what your closing costs will be.
Moving expenses: The cost of physically moving your things from one home to another can be higher than you think. Whether you move yourself or hire a moving company, costs vary significantly–it pays to shop around. Don’t forget to factor in the cost of a temporary storage unit if there will be a delay from vacating one property and moving into another.
Homeowner’s insurance: As a renter, you may or may not have had insurance to cover your belongings. As a homeowner, this is a cost you must take on! According to insurance.com, the average cost of homeowner’s insurance for a $200K home in Texas is just under $2K a year.
Utilities: If you’ve never had to establish service for utilities before, you may have to pay a deposit. Try to have these services transferred into your name on the day of closing or you could find yourself unpacking in the dark or without running water!
Furniture and appliances: This cost can add up fast! Be sure to budget for any furniture you’ll need in your new home. Appliances and lawn equipment are other big-ticket items you may need to purchase.
HOA fees: Many neighborhoods have HOA fees which can be assessed monthly, quarterly or annually. Though the cost can vary dramatically depending on what the HOA provides, the fees will be an important part of your new budget. Make sure you understand exactly how much you will owe, when it will be due and how often the amount could be raised.
The bottom line? Even though some of these additional costs can seem overwhelming, there are many benefits to owning your own home. Setting up a savings account with direct deposit from Southside is an easy way to establish a fund for these expenses before you start your home search. You can also speak with a mortgage expert at Southside to alleviate any concerns you have about the home buying process.