If you’re considering becoming a homeowner, even years from now, recognize that there’s a lot more to purchasing a house than saving enough money for a down payment. Additional expenses come up throughout the home-buying process. Some of these are upfront, out-of-pocket costs that are nonrefundable even if you end up not closing the deal. Others will hit your wallet after the home is in your possession. Experienced buyers probably are familiar with these charges, but first-time buyers can be caught off-guard.
- Home Inspection:
After you’ve submitted an offer on a home and the seller has accepted, make sure the place you’re planning to buy isn’t a lemon. Hire a certified home inspector to examine the property from top to bottom before you go to closing. If you uncover hidden structural, mechanical or other issues, you can negotiate the repair terms with the seller before you finalize the deal. Otherwise, you will be solely responsible for any problems and the cost of fixing them.
- Appraisal Fee:
Your mortgage lender wants to be sure the home it’s about to loan you many thousands of naira to buy is worth every penny. That is why you need a home appraisal before finalizing a mortgage loan agreement. The lender will hire an independent certified appraiser to assess the property value of the home for sale. This includes documenting the various features that make a home valuable, such as a deck, as well as researching the prices of comparable homes sold recently in neighboring areas.
- Closing Costs:
While having enough money saved up for a down payment is great, it’s not the only cash you’ll need to seal the deal on a home purchase. You also need an additional 2% to 5% of the home purchase price to cover so-called closing costs, which can include everything from a loan origination fee and attorney fees to prepaid homeowners association fees and taxes.
Your lender may require you to purchase homeowners insurance before you close on the home. And in truth, even if you buy a home in cash, it’s essential to have this type of policy.
Review all your options for what your insurance will cover before you settle on a policy. Remember to factor in the cost of the home structure itself as well as how much it might cost to replace all the contents inside.
- Property taxes:
Property taxes can vary from city to city and state to state. They can also change each time the value of your property is assessed.
Check with the government agencies that oversee your property taxes to get a general idea of the rate for a particular home, and how much that rate might fluctuate.
There are advantages to owning your own home, but the costs can add up quickly if you’re not prepared.
Consider creating a budget to help you keep track of how much things cost for your home. Then, make sure you save enough money — or generate enough extra income — to cover the expenses that too many homeowners overlook.