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Becoming a first-time homeowner is one of the most significant financial decisions you’ll ever make. Building wealth and equity for yourself (rather than a landlord), putting down roots, and seizing your piece of the American Dream are all appealing reasons to buy. And when you find the perfect home at the right price, a low interest rate, and have saved for a down payment, you may be eager to sign on the dotted line. However, being unprepared for homeownership can spell financial disaster, so be sure to consider the hidden costs before you buy.
Moving expenses. Hiring movers and buying moving supplies add up quickly. An in-state move can set you back at least $1,000 while going out-of-state averages five times as much. To trim costs, enlist friends and family to help you move, reuse boxes and newspapers for supplies, and drive the rental truck yourself.
Unforeseen repairs and replacements. Leaky roofs, gasping HVAC systems, and faulty wiring. If you own a home, something is going to break. In your first year, expect to spend about 1% of your home’s purchase price on unexpected repairs. To keep costs down, be sure to hire a quality home inspector. Also, have your realtor ask the seller to include a one-year home warranty as a condition of purchase. In most cases, a home warranty will cover the replacement or repair of faulty appliances at no cost to you for the first year, with the option for you to renew.
Closing costs. All lender and third-party fees are due at the closing of the real estate transaction. These costs are an additional 2-5% of the purchase price of the house and cover pre-paid taxes, home insurance, home inspection, and more. Your realtor can unpack each fee and service cost. Ask for estimates for both recurring and non-recurring fees and negotiate buyer assistance with closing costs.
Property taxes. Property taxes are determined by the value of your property and land. Your lender can weave your property taxes into your monthly mortgage payment. By doing this, you won’t have to worry about paying off a hefty tax bill at the end of the tax year.
Utilities. If your utilities were previously included with your rent, you might be shocked when you open your first set of bills. When shopping for a home, look for those with energy-saving appliances, windows, and insulation. Also, have your realtor request utility averages from the seller so that you have a general idea of what to expect.
HOA and condo fees. Some properties include Homeowners Association Fees (HOA) and condo fees, which are a separate monthly expense from your mortgage payment. Check with your realtor to see if your property has either of these fees and what they cover.
Lawn maintenance. Are you eying a house with lush green space? You may need to purchase and maintain a lawnmower and other supplies. Or, you might opt to hire a lawn care company to do the work for you. Either way, it’s a cost you need to add into your budget.
Owning the roof over your head can be personally and financially rewarding, but it also carries added costs and responsibilities. Entering into homeownership with your eyes wide open is key. If you have questions about purchasing your first property, please get in touch with our professional and courteous team members.
About Certified Title Corporation: Since 1994, attorney-owned Certified Title Corporation has been furnishing residential and commercial real estate stakeholders across the nation with robust title insurance, settlement, and escrow services. Renowned for their industry-leading reliability and exemplary level of service and quality, the Maryland-based company helps clients from all walks of life achieve their asset goals. To learn more, call (888)486-5511 or visit https://www.certifiedtitlecorp.com/.