A lot of potential buyers focus solely on saving up for their down payment, be it 3%, 5%, 10%, or 20% of the purchase price. There are, however, several other costs you should be aware of. The associated expenses of buying a home, known collectively as “closing costs,” typically account for 1% to 1.5% of the purchase price. One of the most common closing costs has to do with the seller’s tax payments; if they’ve already covered their tax obligation well beyond the period that they’ll be living in the home, you have to pay them back.
Another big one is homeowners insurance. Just like car insurance, you usually pay upfront for coverage for the ensuing 12-month period. Then there are escrow fees to worry about. An escrow company is a third-party intermediary that protects the respective interests of both parties by managing the funds of the transaction, and its services aren’t free. Next up, we have the title fees. If you’re financing the purchase with a loan, you can expect to pay lender title fees, as well. These protect the lender if something happens to the property’s title while you’re its owner and they have a loan on it.
Did you know that you have to pay for the home inspection upfront? In most cases, you’ll also have to bear the appraisal costs. Thankfully, those two costs are the only ones that you have to deal with before closing. For financed buyers, things like administrative fees will be tacked onto the mortgage, and so will private mortgage insurance should your down payment amount necessitate it.
While these costs aren’t exactly “hidden,” they can sure be surprising to buyers who haven’t done their homework. If you schedule a buyer consultation with us, we will provide you with a helpful sheet that breaks down all of this information in more detail. Don’t let the process overwhelm you; reach out to us by phone or email and take advantage of our real estate expertise. Of course, if you have any other questions pertaining to real estate, we’d still love to hear from you. Our goal is to help you gain the knowledge you need to buy with confidence.