Buying a home is exciting, but do you know the true cost of home ownership? Besides the down payment and monthly mortgage payment there are more costs to consider. And the best time to do so is well before you start house-hunting.
Closing costs
These costs vary depending on where you buy, the property, and the loan. Home buyers will pay between about 2 to 5 percent of the purchase price of their home in closing costs. On average, buyers pay roughly $3,700 in closing fees.
These are just a few of the many closing costs your lender may charge a buyer.
An application fee that usually covers things like a credit check and other processing costs. An appraisal fee is paid to an appraisal company to get the fair market value of the property, usually required by the lender. You’ll want a home inspection that explains the condition of the property. And most lenders require the home insurance paid in full for a year at closing. An attorney fee pays for an attorney to prepare and review the closing documents and conduct the closing.
Property taxes
In 2016, each of the country’s 84 million single-family homeowners paid an average cost of $3,296 in property taxes or about a 1.15% effective tax rate.
Commuting
Consider where you work and where you’ll live. Being near mass transit usually provides perks like restaurants, nightlife, gyms etc., but the convenience may cost you.
Insurance cost
A homeowner will on average pay $100/month in insurance costs against property loss or damage. However, that cost can be much higher if you are buying in a flood zone. Be sure to discuss this with your Realtor.
HOA fees
Homeowner association fees range by location. For example, the average in the New York metro area cost is $290, while across the country in Portland, Oregon it’s only $30.
Buying a home is often the most exciting and largest purchase you’ll make in your lifetime. Make sure you’re fully prepared from the planning stage through to making that down payment.