There is no doubt that the purchase of a home is a huge investment, for most people it is the biggest investment they will ever make. But there are many costs that are not always apparent when purchasing a home, that need to be considered.
When working with a Buyer’s Agent, early in the conversation should be a review of potential charges and costs. Some of the possible charges include (but are not limited to).
The deposit is a significant cost for the purchase of residential property. The higher the deposit, usually the lower the interest rate and the better the terms possible for the mortgage or financing. Most traditional lenders want a deposit of 10%, some will work with 5% and others will require 20% of the purchase price. In some cases, it is possible to finance 100% of the mortgage value, but this has become more challenging since the housing market has been increasingly volatile and foreclosure from subprime loans have been exponentially increasing.
The appraisal and inspection are often conditional requirements from the lender. The buyer is generally responsible for both costs. The home inspection is a valuable investment and can save the buyer thousands down the road; it should be done by a certified, professional home inspector. The cost of the inspection varies based upon age, location and complexity of the inspection, but typically is at least $500. The financing company may do the appraisal, but often there are charges tagged on to the purchase price for the service.
The finance company may also require a new survey of the property line, for resale properties (not usually necessary for new building). This may cost close to $1000.
Fees; there are quite a few potential fees extracted in the closing process. There are application fees for the mortgage, legal and notary fees as well as title searching fees. This can add up quickly.
There may be transfer costs and expenses from interest to land property taxes, which may not be apparent until the closing process; it is prudent to plan for excess expenses. Some areas charge renovation or improvement fees if the property has recently been updated.
There are of course moving expenses, which can add up quickly. There may be maintenance, upkeep and décor or repair expenses that will be necessary before you can move into the house. There will be deposits and service charges from some vendors including utilities.
Homeowner associations may charge application or initiation charges in addition to monthly costs.
The investment in a home is an important decision, it requires research, planning and careful consideration; and money.