Being a homeowner in this economy is not an easy task. Homes are likely to be the most expensive thing you will ever buy. And that doesn’t stop once you’ve bought the home. Your expenses go way past the closing price when you buy a house. Obviously, the biggest expense is the cost of the house itself, but there are several other costs as well. There are bound to be upfront expenses right after you buy. Then there are ongoing expenses needed for your home’s upkeep. The hidden costs of a home are more complicated than buying Frontier TV package.
The Hidden Costs & Expenses For a Homeowner
If you are considering buying a house, it helps if you know a few things clear before going in. According to estimates, Americans pay an average of an extra $9,000 annually in homeownership costs. However, this may not always be true. A lot of the hidden costs and expenses vary with how you buy a home and where you buy it. Many of these costs aren’t hidden at all but overlooked during the process by buyers. Knowing the following costs can help you get a better idea of what you are getting into:
- Closing Costs
- Inspection Costs
- Insurance and Taxes
- Utility Bills
Let’s examine these costs in more detail below.
When you make an offer for your home that gets accepted, your bank or lender will have to do some paperwork. This will include a detailed list of your closing costs. Generally speaking, closing costs range between 2-5% of the purchase price you paid for your home. A $100,000 home can cost you between $2,000 to $5,000 in closing costs, depending on the specifics of your arrangement. Closing costs include the following items:
- Lender fees which include administrative expenses, transfer expenses, and credit report expenses necessary to close the deal.
- Government filing fees as well as fees for your attorney and the transfer of the title deed.
- Appraisal fees which are necessary for getting a fair appraisal of the home you are about to buy.
- Interest from the date of closing until the end of the first month.
- Some arrangements may require you to pay a portion of your insurance and property taxes in advance. This will go into an escrow account and is part of your closing costs.
Home inspection expenses are one of the biggest costs when an offer gets accepted. Before the deal closes officially, a home inspection is in order. In most cases, your lender will make a home inspection mandatory. A professional property inspector or inspectors will visit your home, going over the general condition as well as any termite infestations. If your house is older or in poorer condition, you may also want to ask for a sewer inspection. The inspection costs may sting, but they are necessary if you want to make sure you aren’t buying a home that will need even more investment in the future.
Many states require a seller to disclose an inspection from a previous offer where the buyer backed out. In such states, you can make do with the older inspection if your lender allows you to do so. If you’re buying a home in the countryside, a professional property survey is a good idea to mark the boundaries of your home.
Property Insurance and Taxes
Insurance and taxes are the bane of human existence, but they are a necessary evil if you want to become a homeowner. If you’ve been using an online mortgage calculator you should know most of them don’t account for the added cost of property taxes and insurance. But the actual mortgage payments will include all of the following:
- The principal amount of the mortgage
- The interest expenses
- The associated property taxes
- The associated insurance costs
Your lender may also require mortgage insurance if you pay less than 20% of the purchase price as a down payment. The actual property taxes vary according to where you buy your home as well as its value. Luckily, property taxes and mortgage payments are deductible when it comes to paying your annual taxes.
Many people forget to take into account how their utility bills will change when they move from a shared apartment into a three-bedroom house. With more space comes higher utility bills. Obviously, your gas, water, and electric bills may not always be higher than what you were paying before. But for the most part, they tend to increase. Renters, on average, pay less for utilities than homeowners. The actual difference will depend on a number of things. These include how much you paid before, where you live now, and if you now have additional family members.
These hidden costs can be a significant expense when it comes to owning a home. For first timers, this can seriously disrupt your plans and lead you into unexpected debt. The best you can do as a homeowner is to budget carefully and keep your utility and repair needs at a minimum. That means instead of frantic calls to Frontier customer support try rationing your utilities. Careful budgeting and spending come with the territory of owning a home. Just be ready for all the costs going in and there won’t be any nasty surprises.