If you are a first-time home buyer, the home-buying process may be a bit daunting--especially now with inflation and rising interest rates at play with your resources. There are always papers to sign and numbers to crunch as you journey on the way to home ownership! While you may have spent some time calculating how much of a house you can afford and estimating the mortgage loan payment on different homes, there are other costs and fees to consider as you weigh your new home options.
Home Inspections and Property Specific Tests. Having a home inspection done by your own independent inspector is the best way to have a home checked out before you become heart set on a property. You will have to pay upfront for the inspection. Still, it will cover things at the property in detail that a traditional home appraisal may not--and it may uncover some lurking damages, defects, and surprises that you may want to avoid.
A home inspection is generally optional for a prospective buyer--but some property-specific tests are required and incur extra costs to the buyer. If the property has a well, water quality tests may be necessary. Sometimes engineering certifications for foundations are needed, septic systems may require inspection, a roof looking a little suspect may require additional certification or examination, and wood destroying insect inspections are often necessary--just to name a few.
Home Appraisals. You may know that your home will require an appraisal to verify the home's value is on target with the selling price--but you may need to realize that the buyer generally pays for the cost of the appraisal upfront. Depending on the property's location and appraiser rates in the area, obtaining an appraisal report can be a costly necessity--with the fee sometimes reaching several hundred dollars.
It is also important to realize that if an appraiser flags items requiring repair--and the seller agrees to repair those items--the appraiser will need to re-appraise the property to verify repairs were completed and sufficient. The buyer will incur an additional fee for this appraiser's follow-up. While it is usually not as costly as the original appraisal--it can still cost a couple of hundred extra dollars out of the buyer's pocket.
Title Company Fees. A title company ensures that a property is legally owned, not burdened with liens, and is transferred correctly to the new owner. The fees associated with a title company's services may vary widely from location to location and even from company to company. Title company fees are generally consumed within the closing costs of the mortgage loan for the purchased property--but those fees do add to the total cost of the loan and may increase the amount of money a buyer needs to bring to the loan closing.
Home Owner's Insurance & Flood Insurance. Get those home owner's insurance quotes for a potential property early--and get more than one quote. As with title company fees, insurance company rates also seem to vary widely. Your realtor may have local recommendations, or you may find that the agent you use for vehicle insurance can offer you discount combo policy rates. If financing the property, the buyer's homeowner's insurance policy fees are broken down and tacked onto the monthly mortgage payment. So you want to ensure the rate is within your budget.
Not all property insurance rates are the same. A stick-built property is more affordable to insure than a manufactured home. Be sure to consider the property's location, too, as a property in areas with potential flood risk will require a flood insurance policy and a homeowner's insurance policy. Flood insurance can be costly and a budget-busting deal breaker for certain buyers.
Property Taxes. If you are a first-time home buyer, you may be surprised by the cost of property taxes in some locations! Personally, my suburb's property taxes cost about four times more than a similar home in a town about 5 minutes away. Some buyers find that multiple jurisdictions even tax a property to up the property tax bill. The property tax fees also add onto the monthly mortgage payment--so you want to make sure that you are willing and able to pay the fees to live in a specific zip code!
Are you ready to begin your home search? Begin by calculating an estimated mortgage loan payment to get a general idea of the home price you can afford--and remember some other costs to consider as you find the best home for your budget!
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