The number one mistake most buyers make is underestimating the cost of homeownership. You may be able to afford a mortgage, but that doesn’t mean you can afford to be a homeowner. There are tons of other expenses, outside of mortgage payments, including taxes, insurance, maintenance, and periodic home repairs. Being a homeowner can be very expensive and a bit overwhelming at first, but it is still the most important investment most people will make.
The housing market can teeter from good to bad, as we’ve seen with the recent housing crisis, but home values tend to go up building significant equity over time. In fact, according to Lending Tree, home prices in the U.S. rose by three to six percent annually during the past couple of decades. In many cases, owning a home is how most families build wealth.
In honor of National Homeownership Month and the many incentives to buying, consider taking your piece of the American Dream and become a homeowner. Before making the leap into homeownership, it’s important to do your homework – make sure you can afford the cost of owning a home and make sure you understand the true cost of buying a home. The following are a few ‘hidden’ costs to regard when buying:
Title insurance – the fee that’s charged at closing that protects your investment in the event that the previous owner did not actually own the home that was sold to you. This fee is based on the value of the home.
Legal fees – is not required, but is often recommended because buying a home can be a complicated legal transaction. Home transactions typically use boilerplate forms for everything. If so, the legal review may not be required.
Private mortgage insurance – is charged when the house is being purchased with less than 20 percent down. If you have a loan that requires it, count on paying a couple month’s premiums in advance.
Notary fee – is charged at closing and is required to swear that you are who you say you are. This could cost around $50.
Lender/broker fee – this fee is charged by lenders and brokers to prepare purchase documents. This fee could cost between $600 to $1000.
Appraisal fee – this fee is charged to determine fair market value and cost $250 on average.
Survey fee – is the fee that’s charged to determine the exact boundaries of the property. You won’t need to pay for this fee if an existing survey can be used. On average this could cost $150 to $400.
In addition to closing cost and other fees required to get the keys to your new home, don’t forget the hidden cost to actually live in the home. Moving expenses, utility deposits, pest control, paint and new carpet are all additional cost to consider when buying a home. For more information on buying and owning a home, visit www.hud.gov.