Written by Guest | Last Updated October 31st, 2019Our goal here at BestCompany.com is to provide you with the honest, reliable information you need to find companies you can trust.
Property is a substantial investment and one that first-time home buyers aren't always prepared to make. When you look at the costs of buying a home, you have far more to consider than the standard expenses you're likely familiar with. The process is somewhat complicated, and it's easy to lose your way if you don't have a guide.
So what should you know about the home buying process? When you're ready to purchase the perfect property, what should you expect? We'll walk you through some of the costs associated with home buying and detail five expenses to keep in mind as you continue.
1. Earnest money
As mentioned earlier, you have more to consider than the typical expenses you may have heard about. Beyond your down payment, you'll also have to account for an earnest money deposit, which is a sum to show you're serious about purchasing the property. It goes toward your purchase once the sale receives approval.
You can expect to pay up to 3 percent of the home's value up front, though this may change depending on the state of the market. Regardless, you should save a small amount of money to ensure you're ready for this extra expense.
2. Property taxes
If the seller has already paid taxes for some of the time you'll have ownership of the property, you may owe property taxes shortly after purchase. This additional expense, as well as others like it, means saving more money than you might anticipate for the total purchase of the property.
You should also look into municipal taxes and any fees for water or sewer services you need to cover. Of course, these fees are often escrowed at closing, but you should still set aside time to research the full extent of the costs. You'll feel far more comfortable knowing every cost involved in the process.
3. Closing costs
Expect your closing costs to range from 2 to 5 percent of the total sale. These costs include your credit report fee, recording taxes, loan origination costs, and lender's and owner's title insurance, among other expenses. While that percentage doesn't seem like much, consider the median cost of a home in the United States.
As of January 2019, the median sale price was $230,100. If you take 5 percent of $230,100, the closing costs on that home come to $11,505, which is a considerable amount of money to add to your initial investment. With this in mind, make sure you have room for closing costs in your budget to avoid any issues.
4. Moving service
It's often an afterthought, but moving costs are a factor in most home purchases. After all, you have to deliver your belongings to your new address, and most people can't fit their clothing, furniture, electronics and other items in the back of their car. You'll likely have to hire a professional service or rent a truck.
Moving fees often fall between $100 and $1,000, or even more, depending on your needs. If you're moving from an apartment and have fewer items, you won't have to spend an enormous sum of money on moving. On the other hand, if you're moving from another home, you may need to pay more for adequate service.
5. Maintenance Expenses
The months preceding your move represent a prime opportunity to develop your DIY experience. When you come across an issue such as a drafty room, search for tutorials and attempt to address the problem with your own toolkit. Unless the situation demands it, don't contact your landlord or a repair company.
Your toolkit will save you money as you settle into your new home. Without experience with repair, you'll incur expenses you could have otherwise avoided, and these expenses can build quickly if you're too dependent on outside help. That said, don't hesitate to contact a professional for more involved projects.
Are you ready to buy a house?
When you purchase a property, you have to consider more than your down payment, an appraisal, a professional inspection, and your mortgage. You also need to evaluate your property taxes, moving service costs, and the money you'll pay for maintenance, among the many additional costs of buying a home.
It sounds like a lot to prepare, but in the end, homeownership will be well worth the effort. Make sure you’re completely prepared for the financial realities before you ditch your lease.