Consider these 5 Costs before Purchasing a Home

By: Ava K., Assistancefinder
Published Mar 6, 2020 8:20:01 AM


The prices of homes are going up all across the United States, and this is due to relatively high demand in a market with low inventory. You might have to stretch what you can afford a bit if you want to buy a home in this climate, but don't stretch yourself so thin that you can't afford those hidden costs that you'll incur during the home-buying process. Your budget needs to include the extras that most people tend to ignore. You'll find a few of these easy-to-miss costs below.


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Home Inspection

In many cases, a home inspection will be required by your lender if you are buying a home with the help of a mortgage company or bank, which many will. The inspection gives the lender peace of mind since they can be sure there are no serious issues that would detract from the value of the home, and it gives the buyer a similar peace of mind for essentially the same reason. Inspectors will be able to find faulty electrical systems, issues with the HVAC system, and other similar systemic issues with the home.
Ideally, the inspector will provide you with a detailed report that lacks any significant issues, but if there are problems, the inspector will certainly find them and report them. This process isn't free, and the standard cost of a professional home inspection is around $400.

Some buyers take the extra step and have additional inspections performed for more niche issues, like termite damage, radon exposure, and more. If any inspector finds an issue, there is a chance that the lender could demand that the issue be repaired before they will move forward with the loan, and that cost will fall on either the seller or the buyer.

Closing Costs

Closing costs are the fees that you'll end up paying that cover the cost of the labor of those who work to make the process happen at all. This might include fees for a realtor, inspector, insurance costs, and lawyer's fees. These costs are usually absorbed into the loan, and you'll get an itemized list of each expense. In general, the closing costs will add anywhere from 2 to 5 percent to the final cost of the home.

Property Taxes

Taxes are a part of life, and the home-buying process is no different. Once you own the home, you're responsible for paying the property taxes for that real estate. In general, property taxes are built into the mortgage through an escrow account, which prevents the buyer from having to deal with a separate tax bill. Unfortunately, taxes change from year to year, and they usually go up instead of down. That means you might end up having to pay excess taxes beyond what your escrow account covers.

Another issue with property taxes is that they never go away. Even when you finish paying off your mortgage so that you own the home free and clear, you'll still have to worry about paying those property taxes every single year.

Some states have higher property tax rates than others, so make sure to take that into account if you are planning to move to a new state. In 2016, the average yearly property tax value was about $3,300, which translates to an average effective tax rate for the entire nation of 1.15 percent. States with high tax rates include Vermont, Illinois, New Jersey, and New Hampshire. State with low tax rates include Delaware, Hawaii, Alabama, Tennessee, and Colorado.

Repairs

When you first buy your new home, there will probably be several changes that you'll want to make right away, and those changes will slowly add up to a significant cost if you aren't careful. Not only will the financial cost be high, but you'll have to manage and upkeep those improvements, especially landscaping changes that require constant attention.

You could think of maintenance as a fixed cost since there is almost always something that could be improved or bettered in the home. New problems will always arise as well, so it's good to be prepared for them when they do. Any immediate additions, like a wood fence or new deck, will need to be budgeted as well.

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