If you think buying a home requires straightforward costs like the down payment, monthly mortgage payments, and utilities, you’re in for a surprise. Although these are all valid expenses, they’re not the only ones you’ll need to account for.
Whether you’re a first-time buyer or not, it’s important to be mindful of all the potential costs of purchasing and owning a home. Factor in these six additional costs when considering post falls Idaho real estate to buy a new home.
The Down Payment
The amount of your down payment will directly affect your mortgage loan amount, and therefore, how much you’ll end up paying in interest over the life of the loan. For most first-time buyers, coming up with a 20% down payment is challenging, if not impossible. In that case, you’ll likely be required to purchase private mortgage insurance (PMI), which will increase your monthly mortgage payment.
Other options to arrange for downpayment money include:
- Asking family and friends for help.
- Borrowing from your 401k or IRA account (although you’ll have to pay taxes and penalties if you’re younger than 59 ½).
- Using a “piggyback loan,” where you take out a second loan for part of the down payment.
- Participating in a down payment assistance program.
Closing costs are the fees charged by your lender, real estate agent, attorney, and other parties involved in the home-buying transaction. They can add up to several thousand dollars, so it’s important to factor them into your budget.
Here is how to keep the closing costs in check:
- Get a good faith estimate of all the closing costs before shopping for a home. This will give you a baseline to compare different properties.
- Ask the seller to pay some or all of the closing costs. This probably won’t be possible, but it never hurts to ask!
- Look for a no-closing cost mortgage. These loans typically have a higher interest rate, but you won’t have to bring any money to closing.
Although you can skip this step to save some bucks, we strongly suggest you don’t. The inspection is meant to protect you from buying a home with major hidden problems. The average cost of a home inspection is around $300, but it could be more depending on the size and age of the home.
Homeowners insurance protects you in the event of a fire, theft, or other damage to your home. The cost of homeowners insurance varies depending on the value of your home, but you can expect to pay several hundred dollars per year.
Here are a few things to keep in mind when buying a homeowners insurance:
- Understand what’s covered and what’s not: This will ensure there are no hidden surprise costs like additional charges for inspecting the driveway.
- Consider raising your deductible to lower your premium: A higher deductible means you’ll have to pay more out of pocket if something happens, but it also means a lower premium.
- Shop around and compare rates from different insurers: Don’t just go with the first quote you get. Use an online service to compare rates from different companies.
Property taxes are based on the value of your home and are typically paid to your municipality or county. The amount you’ll pay in property taxes can vary widely depending on the location of your home, so be sure to factor this into your budget. You may be able to deduct property taxes from your federal income taxes, so be sure to speak with a tax advisor to see if you qualify.
Home Maintenance and Repairs
Owning a home comes with a long list of potential maintenance and repair expenses, from changing the furnace filter to fixing a leaky roof. Some of these costs can be planned for by setting aside money in a “rainy day fund,” but others will be unanticipated.
Your new home can also be an investment asset, and buying one doesn’t have to be overwhelming. By understanding the expenses involved and planning ahead, you can ensure a smooth and stress-free home buying experience.