Buying a home is an exciting milestone, whether you’re a first-time buyer or a seasoned investor. The journey to homeownership is often filled with dreams of new beginnings and the stability that comes with owning property. However, while the purchase price of a home is the most obvious cost, many hidden expenses can catch buyers off guard. At LV Realty, we believe in transparency and preparing our clients for every step of the process so that there are no surprises. Here’s a comprehensive list of the hidden costs of buying a home that you as a buyer should be aware of.
1. Home Inspection and Appraisal Fees
Before finalizing your purchase, it’s crucial to conduct a home inspection and appraisal. These fees ensure that the home is structurally sound and worth the price you’re paying.
- Home Inspection: Typically costs between $300 and $500. This inspection can reveal issues that may require expensive repairs.
- Appraisal: Usually costs between $400 and $600. Lenders require an appraisal to confirm the home’s market value aligns with the loan amount.
2. Closing Costs
Closing costs encompass various fees related to the finalization of your home purchase. They typically range from 2% to 5% of the home’s purchase price and include:
- Loan Origination Fees: Charged by your lender for processing the loan.
- Title Insurance: Protects against disputes over property ownership.
- Attorney Fees: If applicable are for legal services to ensure the contract is sound.
- Recording Fees: Charged by local government for documenting the sale.
- Property Transfer Fees: Some states/HOA charge a transfer fee when properties are changing hands.
- Buyer Broker Fees: Covers various administrative tasks such as document preparation, transaction coordination, and ensuring that all paperwork is completed accurately and on time.
3. Property Taxes and Homeowners Insurance
Once you own a home, property taxes and homeowners insurance become recurring expenses.
- Property Taxes: Vary by location but can be a significant annual expense. Be sure to research property tax rates in your desired area.
- Homeowners Insurance: Protects against damages to the home and typically costs $500 to $1,500 per year, depending on the home’s value and location. If you’re using a loan, a requirement of the loan approval is having home insurance in order to close.
4. Private Mortgage Insurance (PMI)
If your down payment is less than 20% of the home’s purchase price, lenders often require PMI. This insurance protects the lender in case you default on your loan.
- PMI Costs: Usually between 0.3% and 1.5% of the original loan amount per year.
5. Maintenance and Repairs
This one shouldn’t come as a surprise to aspiring homeowners. But once you become a homeowner it will come with the responsibility of maintenance and repairs of the home. Be cognizant of any soon to be needed major repair items directly after purchase and also ones that might be coming up in the near future. Workout a plan and budget accordingly. Of course make note of monthly or yearly maintenance and upkeep items as well. Working professionals who understand a home’s quality and condition can help you avoid buying a home that will need significant repairs immediately.
6. Utilities and HOA Fees
Don’t forget the monthly costs of utilities and, if applicable, homeowners association (HOA) fees.
- Utilities: Water, electricity, gas, and trash services are necessary expenses.
- HOA Fees: If your home is in a community with an HOA, you’ll have monthly or annual fees for amenities and maintenance of common areas.
7. Moving Expenses
Moving into your new home also comes with costs that can be easy to overlook.
- Professional Movers: Depending on the distance and amount of belongings, hiring movers can cost several hundred to several thousand dollars.
- Supplies: Boxes, packing materials, and rental trucks add to the moving expenses.
8. Buyer Agent Commission
This will become something that might become common place for buyers to now pay out of their own pocket come August 2024. Traditionally in the real estate industry it is the sellers that pay both their listing agent commission and the buyer’s agent commission. Due to a lack of perceived negotiations and the result of the NAR Commission Lawsuit. The industry is making changes to make it clearer to sellers that all commission is negotiable. Meaning sellers will set the commission for their listing agent as well as the buyer agent if they choose to compensate. In the situation where a seller refuses to offer compensation to a buyer agent, the buyer must now pick up the commission for their buyer agent. This buyer agent commission is to be negotiated between the buyer and buyer agent prior to seeing any homes. There are ways to still workout a deal with a seller who has disclosed they are not paying a buyer agent commission. When you work with a professional, they can help present those options to you. As this buyer agent fee is negotiable it will vary from market to market, however you can estimate somewhere between 2%-3%.
At LV Realty, we aim to ensure that our clients are well-prepared for all aspects of home buying. Here are a few tips to manage these hidden costs:
- Budget Wisely: Include these hidden costs in your budget to avoid financial surprises.
- Save for Emergencies: Maintain an emergency fund to cover unexpected repairs and expenses.
- Get Professional Advice: Work with real estate professionals who can guide you through the process and provide insight into potential costs.
Buying a home is a significant investment, and understanding the full scope of expenses will help you make informed decisions and avoid financial strain. At LV Realty, we’re here to support you every step of the way, ensuring a smooth and transparent home buying experience.
For more information or to start your home buying journey, contact us at LV Realty today!