First Time Homebuyer Spotlight: How Much Does it Really Cost to Buy a House?
This post first appeared in the November edition of Cirios Trends: Getting to the Bottom of the Housing Market
When trying to determine if they can afford to buy their first home, many first time homebuyers leave out a whole host of costs that then become
unwelcome surprises once they’re already emotionally invested in a purchase.
There are a whole host of fees and costs that neither Realtors or lenders are terribly excited to tell you about, preferring to gloss over the details until they have you well along in the process.
It’s imperative to sit down and budget all the out-of-pocket expenses that go into buying a home, in addition to the down payment and of course monthly recurring payments to arrive at the total cost, err, joy of homeownership.
Keep in mind that these are the realities of buying, and eventually owning a home. They should be accepted, evaluated and budgeted just like more widely quoted expenses like interest rates.
But a quick scan of a list of the fees included in an estimated HUD (effectively a list of all costs associated with a home purchase) can show be a bit intimidating:
- Loan Origination Fee
- Document Fee
- Processing Fee
- Tax Service Fee
- Appraisal Fee
- Credit Report Fee
- Messenger Fee
- Flood Cert Fee
- Escrow Fee
- Notary Fee
- Recording Fee
- Other Title Fee
- Monument Fee
Now that is a lot of fees! Some are no more than $10, but others can be hundreds or even thousands of dollars. When you first meet with a lender to discuss pre-approval, always ask for a list of fees or a sample HUD statement so you can have this information ahead of time.
In addition to closing-related fees, buyers also need to be aware that they may need to pay pro-rata property taxes. Pro-rata what?
In California, property taxes are due twice a year, February 1st and November 1st. So, depending on when you buy your house, you may have to pay taxes to carry you through to the next payment at the time you make your purchase.
On top of these lesser known fees and costs, you have the down payment to consider, which in most cases is the biggest out-of-pocket expense for any home purchase.
Don’t forget moving costs, buying furniture, repainting and any other initial maintenance items that your particular home may need. Also, don’t forget upkeep, which should be expected to be around 1% of your home’s cost, per year.
Although potentially intimidating, any potential home buyer should take the time to make a detailed budget of these costs, after careful research and consultation with both a real estate broker (like Cirios!) and mortgage lender.
Then, based on your own budget and the mortgage calculator resources available online (see previous edition of Cirios Trends for thoughts on mortgage calculators), you can ultimately arrive at how much home you can afford.
Then … it’s time to go shopping!
Tags: APPRAISAL, Cirios real estate, escrow, first time homebuyer, taxes