Ready to take that big leap into home ownership? You've been saving your money for awhile now and think you have enough to purchase your first home. However, there are more expenses when purchasing your new home than just the home itself.
Below is a simple checklist to follow to make sure that you are not caught unaware of the costs involved and are able to purchase your perfect dream home.
The typical down payment for a new home is 20% of the purchase price. Sometimes you can get away with a smaller down payment due to your credit status, however that is not always advisable. Smaller down payments can lead to a larger interest cost during the life of the loan.
Private Mortgage Insurance (PMI)
This is a type of a Mortgage Insurance that protects the lender, not you. This insurance can be added into your monthly payments or you could be charged up front depending on the lender.
This is different than PMI as this type of insurance actually benefits you, the homeowner. You will need to have deposited enough money to cover the first few payments of homeowners insurance before the purchase of your home can be completed.
If you are searching for a home in a specific neighborhood check the property tax for homes in that area to get a good idea of what the property tax could be for your new home. Keep in mind that the tax rate is flexible depending on location.
This little wonder is placed in an escrow account and used to show 'good faith' or 'serious intent' when you go forth with the purchasing process. Typically is not a large percentage of money and will be applied to the down payment or closing costs. You will get this money back if the sale on the property does not finalize.
Some neighborhoods require annual association dues that include lawn maintenance and other fees. If you are purchasing in a neighborhood or a condo, ask if there are association fees that may be required. There are other maintenance fees that you may need to consider when purchasing a new home such as lawn maintenance and/or pool maintenance. Check the appliances in your new home and see if they will need to be replaced anytime soon. You may be able to work out a deal with the seller on these items before you purchase the home.
Will you be needing a moving truck or movers? Remember to add those expenses into the final tally.
Many utility companies require a deposit. Check with the electric company, water, cable, gas, internet etc and see if they require a deposit when they turn on the services.
These are magical costs that will just appear near the end of closing. These fees include appraisal, survey, home inspection etc. These costs fluctuate with each mortgage ask about the closing costs in the beginning of the process to have a better idea of what you are looking at.
Although, all these costs may seem incredible at first, remember that as a new homeowner there are plenty of resources out there to help you when it comes time to ditch the old rental blues. As long as you are prepared and plan a bit in advance you will ensure that the process is smooth and that you are ready to take home ownership by the horns!