Buying a home is a big deal. In fact, it’s one of the biggest deals people make in a lifetime! For most of us, buying a home will be the single largest financial transaction we’ll ever make. So, it’s no wonder how important it is to understand what exactly you’re getting into – the true cost of buying a house. Sure – if you’re reading this, you already know the basics: the down payment, the monthly mortgage principal payment, and the interest amount. But there are a few more costs you probably haven’t considered yet. Don’t worry, you’re not alone. Let’s break them down:
A lot of people forget to factor property taxes into their home-buying budget. You’ll almost always pay your property taxes as part of your regular monthly mortgage payment. But – heads up – it can often add hundreds of dollars to your monthly payment. The exact tax rate will depend on a number of factors, including your property value, your city, and your state – so be sure to double-check the tax figures before purchasing the house.
When you take out a mortgage to buy a home, your lender will insist that you take out homeowner’s insurance on the property in order to close the deal. There’s not really any way around it, so factor this payment into your plans. As with property taxes, homeowner’s insurance premiums are often paid right alongside your usual monthly mortgage payment. Again, the amount will vary depending on the specs of your home and its location – for example, you will pay more if you live in an area that is susceptible to hurricanes – hello, Florida! For an exact quote, contact an insurance broker prior to closing on the home.
Private Mortgage Insurance
If you are planning on making a down payment of less than 20 percent, there is a good chance that you will need to pay for private mortgage insurance (PMI) alongside your regular mortgage payment. PMI is a safety net for your lender, in case you can’t continue to pay your mortgage – but it’s you who gets stuck with the bill. Your lender will be able to tell you exactly how much you will pay for PMI, but the costs can quickly add up if you are not careful.
Of course, once you do finally close on your new house, you will want to actually move in. Many people forget to budget for the cost of movers, rental trucks, and any special equipment they might need. In order to be well prepared, you should consider getting a few moving quotes before you ever even begin your home search. In our experience, moving a 3 bedroom home can cost $5,000 to $15,000, depending on how far you’re moving, or how much help you hire to get you there. Yikes!
Sure, there are plenty of hidden costs when it comes to buying a home – but don’t let that scare you away from the opportunity. By planning and budgeting for these expenses, you will be able to avoid some of the nasty surprises that some new homeowners have to deal with. Happy hunting!