11 Expenses You May Incur When Buying a New Home
Unfortunately, the sales price is just the beginning of the expenses when it comes to home ownership.
Buying a new house is a major expense and prices seem to go up every year. According to the Census Bureau the median sales price of a home in the United States was $278,800 in 2015. Unfortunately, the sales price is just the beginning of the expenses when it comes to home ownership.
Buying a home involves fees, insurance, moving expenses and a number of other costs that most people don’t consider before they start shopping for a new house. If you overlook these expenses it could put a major strain on your budget, or keep you from buying the house of your dreams.
Here are just a few expenses you will need to budget for this before heading out to look for your future home:
Fees: There are plenty of fees involved when purchasing a house, and the cost can quickly add up. Ask about all fees during the process and be sure to add them into your budget. There will be attorney’s fees, application fees, recording fees as well as appraisal fees. Here are just a few fees you may need to consider, actual cost will vary by location:
Government recording charges: This is the fee state and local governments charge to record your deed, mortgage and other loan documents.
Appraisal fee: You will need an appraiser to calculate the value of the house you are considering.
Title services: There can be numerous fees related to your home’s title and recording the new title.
Tax service fee: These fees are related to the tax status of the house and ensuring that all taxes on the home are up to date.
Title Insurance: Title insurance is a necessity. It protects the buyer in the event that the seller, or previous sellers didn’t have free and clear title to the property, which means that their right to sell it to you would be in dispute. The cost of title insurance varies by state but in general, budget 0.5 percent of the purchase price of the house.
Private mortgage insurance (PMI): If you can’t afford to put down 20 percent, you will need to purchase PMI. Once you have 20 percent equity in the home, it is possible to drop PMI insurance. The costs of PMI can be hefty, costs can range between 0.3 percent and 1.5 percent of your loan amount. This must be paid on a yearly basis.
Prepaid Expenses: When closing on a home you may have to pay some expenses ahead of time. It varies by the deal you worked out but some expenses that may come up are property taxes, a quarters worth of homeowners insurance, and possibly PMI. Costs vary dramatically but these expenses can easily add up to a few thousand dollars.
Homeowners Insurance: Unless you are paying cash for the house, your lender will require homeowners insurance and possibly flood insurance depending on where the home is located. Shop online and get multiple home insurance quotes on any home you are considering so there are no surprises when its time to write a policy for your new home.
Check if the house is located in a flood plain as flood insurance can be expensive and it will be required if your home is in a flood risk area.
Home Warranty: While a home warranty is not required, it is a good idea if you are not buying a brand new house. It will step in to cover expenses if the house turns out to have a lot of major issues that need repair. Read the warranty thoroughly and look for exclusions. Costs will vary but $300 to $1,000 is normal depending on coverage levels.
Moving Expenses: Hauling all of your stuff from one place to another has a cost associated with it and in many cases, it’s more than you might expect. Depending on how far you are moving, and how much stuff you have, expect to spend $1,000 to $6,000 for moving expenses.
Utilities: Before making an offer on a house be sure you have a good idea of how much the utilities will run. This is especially true if you are moving to a much larger living space. A three-bedroom house is going to cost much more to heat than a studio apartment. Sky-high utility bills can also indicate a lack of insulation or other issues with the house. Utility costs will vary depending on where you live and the size of the house, ask the current owner for copies of bills to get an idea of costs.
Furniture: A new house often requires new furniture. Whether you are moving to a larger home and need to fill additional rooms or your old furniture just doesn’t fit with the look of your new house, there is a good chance you will be purchasing some new furniture. The cost of furniture can vary dramatically depending on your tastes, and where you decide to shop.
Miscellaneous Costs: A new house usually requires a few upgrades or changes to make it your own. Painting, cleaning out the gutters, an annual inspection and cleaning of the HVAC system, and lawn care can add up. Itemize the things you want to change in the house and set a budget to determine the overall costs.
Lawn Care and Other Items: If this is your first home you may need to buy certain items such as a lawn mower, snow shovel or snow blower, rakes, hoses and other miscellaneous tools. While not a huge expense, the costs can add up.