Hidden Costs of Buying a Home You Need to Know

Hidden Costs of Buying a Home You Need to Know

Buying a home is one of life’s most significant milestones. While most buyers focus on the listing price, closing the transaction often comes with unexpected expenses that can catch buyers off guard. Understanding these costs can help you prepare financially and avoid unexpected surprises.  In this post, we will look at the less obvious expenses of homeownership, from upfront fees to ongoing costs, so you can make a well informed decision.

The True Cost of Buying a Home

When budgeting for your new home, the listing price you see isn’t the only number to consider. Additional expenses can add up quickly, making a significant dent in your savings. Below are some of the costs every home buyer should know about.

Closing Costs

Closing costs are a bundle of fees paid at the finalization of the real estate transaction. These fees typically range from 2% to 5% of the home’s purchase price but can vary. Some common fees in the closing costs include:

• Loan Origination Fees: Charged by the lender for processing your loan.
• Appraisal Fees: Paid to assess the market value of the property.
• Title Insurance: Protects you from disputes over ownership.
• Attorney Fees: Covers the cost of the buyer’s attorney (more on that in another post)

Tip: Request a breakdown of estimated closing costs from your lender early in the process to avoid any surprises.

Home Inspection

After your offer to purchase the home has been accepted, you will have a ten day inspection period in which to have the home inspected. You are able to have any inspection you would like, some to consider beyond the “normal” home inspection would be lead paint if the house was built before 1978, radon gas and pest inspection to name a few.

• Inspection Costs: costs can vary depending on the size of the home and what the inspection covers. Expect to pay between $500-$1,000.

Property Taxes 

Property taxes are an ongoing expense and varies based on the home’s assessed value and local tax rates. Lenders include taxes in your monthly mortgage payments but they will go up over time. If you are looking in several different towns research the tax rates for each, you will be surprised at the different rates.

Homeowners Insurance

Home owners insurance is a must to protect your investment from unforeseen events and your lender will require it and will include the premium in your mortgage payment. Buyers will pay between three months to a year in advance and the lender will need proof of insurance, called an insurance binder. Premiums depend on factors such as location, property value, and coverage levels. Buyers will need an additional policy in the home is located in a flood zone.

Private Mortgage Insurance (PMI)

If your down payment is less than 20% lenders will typically require PMI to protect themselves in case the buyer defaults on the loan. PMI can add a significant amount to your monthly payments until you reach the equity needed to be able to drop the insurance.

Utilities

Before the buyer closes on the house it is necessary to contact the utility companies to switch the services over to their names. The seller typically calls with a closing date for transfer with the buyer then calling to confirm the change. These utilities are usually electric, gas, cable, water and sewer but vary depending on where you purchase. Several towns on the South Shore have private wells and private septic systems.

Unexpected Repairs

Even with a thorough home inspection home unforeseen repairs can come up. A leak in the roof, an electrical or plumbing issue or furnace are problems that homeowners can face. Sometimes sooner rather than later. Consider asking the seller to provide you with a home warranty or consider buying one yourself. A policy can cost anywhere from $500 to $1.500 depending on what the policy covers. As with any contract, make sure to read the fine print.

Buying a home is a rewarding but complex process, being aware of the hidden costs can save you from financial stress. By planning ahead and budgeting for these expenses, you’ll be in a better position when surprises hit.

As always, let us know if you have any questions regarding home selling, home buying or just the market in general. We would be happy to help.

Kim Ouellette, Realtor®                                                                          Christine Ciavarro, Realtor®

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