It's important to keep the possibility in mind that you could be on the hook for other hidden homeownership expenses and plan well in advance. Here's how.
Purchasing a new home includes much more than signing a contract and making the move to a new location. Keep reading to discover five money-related questions to ask yourself before you start searching for a new place to call home. These questions will help you explore some of the monetary costs you may encounter when buying a new home.
(1) Should I hire a realtor and how much do their services cost?
A buyer’s real estate agent is a licensed professional who can help you immensely throughout the home purchasing process. The buyer’s agent is committed to representing a home buyer and their best interests regarding a real estate purchase. Fees for a home buyer’s realtor typically cost the home buyer nothing.
However, the home seller’s agent is normally the one who picks up the tab by splitting their sale’s commission with the buyer’s agent. For example, if a seller’s realtor is contracted to receive a 6 percent commission from the home seller on the sale of a $300,000 home, that would amount to $18,000 to the realtor. If a buyer’s agent is involved, the home seller’s $18,000 commission fees would be split between the two agents, with each of the realtors receiving $9,000.
(2) Is an appraisal necessary on a home you’re buying, and who pays for it?
Unless you’re a cash buyer, an appraisal is typically required on the house you’re buying. Your lending institution requires an appraisal because they have a vested interest in the property. They want to ensure it’s worth the dollar amount they’re lending to you, and an appraisal gives them that assurance.
According to information on the Home Appraisals, Inc. website, it would also be a good idea for a cash buyer to obtain an appraisal on the property to assure them that the money they’re spending is worth it. A home buyer is usually responsible for the cost of the appraisal. The Home Advisor website reports the average cost for a professional home appraisal nationally is around $336.
(3) What is a home inspection, is it required, and how much does it cost?
A home inspection is a thorough visual examination of a house you’re buying by a trained home inspector. Each state has its requirements for becoming a licensed home inspector. The American Society of Home Inspector’s website lists typical items included in a standard home inspector’s report. The report covers information, such as the condition of the roof, attic, walls, ceilings, floors, windows, foundation, and more.
Even though a home inspection isn’t always required when you purchase a home, it’s still a good idea to get one. If there are major house-related problems that you can’t detect, a home inspector can often find them. Then, if a house has serious issues, you can decide if you want to move further along in the home purchase process. The home buyer is usually responsible for footing the bill for a home inspection. According to the Home Advisor website, the average home inspection costs about $315. Larger homes cost a bit more, with radon and mold testing for additional fees.
(4) What are closing costs and how much can I expect to pay for them?
Home sellers and buyers each have their list of closing costs when the legal house transfer from the seller to the buyer is finalized. The home buyer’s costs are associated with the purchase of their new house. Closing items could include costs for property taxes, appraisal fees, mortgage insurance, homeowner’s insurance, credit reports, and loan origination fees among other costs.
The average closing costs for a home buyer run between 2 percent and 5 percent of the loan amount. For instance, on a $100,000 home price, a home buyer can expect to pay between $2,000 and $5,000 in closing costs. This amount is in addition to the monetary down payment.
(5) Besides my mortgage payment, what other home-related costs should I expect?
Before you purchase a new home, develop a realistic budget to include your mortgage payment, as well as other home-related expenses. If you fail to include these other monthly home costs, your budget will be useless. For example, a homeowner typically pays for monthly utilities, such as water, electricity, sewer, natural gas, and trash service. Other home-related costs might include fees for cable television, satellite dish, landline telephone, or internet connection.
Don’t forget to include any homeowner’s or condo association monthly dues, as well as special fees specific to your neighborhood, such as a monthly country club or golf course fee. Regular expenses for keeping up your lawn, swimming pool, or trimming bushes and trees should also factor into your budget. Be sure to insert a budget category for home maintenance and repairs, both expected and unexpected.
You’ve reached a significant financial milestone when you purchase your first home. However, as you just read, it’s better to be aware of some typical money-related questions and answers before you embark on your first home search. Also, planning for anticipated home-related expenses will help you budget wisely.