A decision to have your first house is exhilarating and responsible. While purchasing a house is a realization of your dreams, you still have to think about its impact on your financial health. Now it’s necessary not to let emotions make a decision for you. There are some hidden points you need to consider not to get your finance damaged by these unexpected spending.
Thus, here you have a list of such hidden costs you should be ready to.
This amount is necessary to make a seller believe you are determined to make a purchase. It’s so-called collateral during the sale process. If a purchase is agreed, this amount is used as a part of your down payment. Otherwise, you can take your money back.
It’s necessary to have about 5% of the house price to be used for earnest money. But mind that this price can vary depending on your state. You should be ready to have an amount that a seller might be expecting to get. You definitely don’t expect to lose a house you choose just because you have not enough money right now.
Depending on your financial possibilities you can choose a down payment. Also, it depends on the loan you take. Some loan programs offer a low down payment that requires just 3% of a house price. But such attractive propositions demand good payment history with a high credit score (we recommend knowing the credit score you need to buy a house) and some other requirements. You can also check how you can buy a home with no down payment at all.
Homeowner’s And Mortgage Insurance
Being a homeowner also means you need to cover all expenses related to your property. Insurance is the chance to protect your investments from fire, burglary, or natural disasters. You can choose from different types of home insurance and even reduce the total cost after negotiations.
Also, if you don’t cover at least 20% with your down payment, you will need to cover mortgage insurance. It’s a protection for your lender from a possible situation when you fail the repayment.
The payments for these two insurances can be included in your mortgage payment.
As it will be your first home, you might have never thought about maintenance costs, as your landlord did it for you. But now it’s not enough just to call and have all the problems solved. This luxury is not for homeowners. Now you need to take care not just of all repairs necessary in the house, it’s also up to you to look after the loan.
Considering the climate of your region, you might also need some extra equipment. So, take these extra costs into consideration and set aside some cash to have money for such unexpected problems. To do this, you might need to create a list of things that may happen.
This item of expenditures is also unknown to renters. It’s an annual tax and you can’t influence its size. This property tax depends on the state you live and is disclosed in your agreement. It’s typically about 2% of your home price.
The payment of this tax can also be done on a regular basis. But you can decide to cover it once a year with a separate bill. Just make sure you have calculated this amount in the total price.
This payment covers all the rest expenses from attorney’s fees to preparation fees and other ones that you might have no idea about. You can negotiate with a seller to cover these costs. Otherwise, you need to have about 4% of your house price to deal with closing costs.
Now you have a clear understanding of extra fees you will have to cover as a homeowner. It can impact the house price you can afford, so it’s better to be calculated at once. Find also out our tips to buy a house and mind that an emergency always happens unexpectedly, so you need to be ready at least financially.