Don’t be caught off guard by two upfront fees that homebuyers have to pay.
When you buy a home, you agree to incur many ongoing costs, including your mortgage, property taxes, maintenance and repair expenses. Most people know that they will have to meet these expenses when they enter the buying process.
But, aside from the ongoing costs of home ownership, there are two very important expenses that need to be prepaid when you first buy your home. They can add up to tens of thousands of dollars, and if you’re not prepared, you could find yourself facing financial shock in the weeks before you commit to homeownership.
Let’s take a closer look at these two big expenses.
1. Closing costs
The first big upfront expense you’ll have to pay is closing costs. These are required by your mortgage lender, as well as by the government. They include fees for things like home appraisal, mortgage origination fees, title insurance, transfer taxes, and prorated property taxes. And they can add up to about 2% to 5% of the home’s value.
Some lenders allow you to borrow for closing costs, but you will need to make sure that this does not negatively affect your ability to get a mortgage, as lenders are only willing to lend you an amount of. money equal to a certain percentage of the value of your home. Other lenders will offer âno closing costsâ loans without adding fees to your loan balance, but that usually means they are making money by charging you a higher interest rate.
You usually don’t want to end up with either of these options, although they allow you to avoid up-front closing costs, as they can make your loan more expensive in the long run. You should be prepared to pay closing costs out of pocket on the day you sign your loan documents and ownership of your new home transfers to you.
2. Moving expenses
Moving costs are another big expense you need to be prepared for, especially if you are moving long distances or have a lot of stuff.
Even if you opt for a low budget move and plan to haul your own belongings, you will still need to factor in the cost of truck rental and insurance as well as gasoline – which can be quite expensive in the future. itself right now because of the price at the pump. And if you pay professional movers, you can expect to pay thousands of dollars for help with packing and transporting your belongings.
The moving costs will obviously have to be paid when moving into the new house. It can be difficult to find the extra money for them at the same time you make a down payment for the house and deal with closing costs. But you don’t want to end up not having the means to move your belongings from your old place to the new one.
Before committing to buying a home, be sure to research what your move will cost you and carefully review the lender’s estimate for total closing costs. If these two expenses aren’t yet within your budget, consider postponing your home purchase until you can save a little longer to cover them.