You think you know the costs of buying a house. You’ve been browsing online listings, you’ve spoken to some real estate agents, and you’ve got a home lined up that meets your budget. After some careful negotiations, you and the seller have agreed on a price for the home.
This is where the problem begins.
When you’re negotiating, you’re thinking of your budget in terms of the actual house price. However, there are loads of other costs that pile on top of one another when buying a home. If you’re not careful, they can catch you unawares and mean you end up paying more than your budget allows overall.
What are these costs? Some are obvious, but here are three somewhat hidden ones that catch you out:
Closing costs
This relates to a whole list of additional costs you pay during the homebuying process. It includes things like home inspections, lawyer fees, appraisal fees, document fees, mortgage applications, your home warranty, and so on. All of these costs are added on after you have paid for the home, meaning the final price you pay could be a lot more than you expected. Yes, the house itself hasn’t gone up in price – so the seller doesn’t get more money. It just means you’re paying more people more cash, which can harm your budget.
Moving costs
Naturally, when the house is bought and you’re ready to move in, you have to pay to get all of your stuff into the old home. Did you know that the cost of moving can be quite substantial, particularly if you are going somewhere quite far away? We’re talking at least another $1,000 added to your homebuying bill, and this can rise quite dramatically if there’s a lot of transportation involved. The more trips a removal company has to do to and from your old and new home, the more expensive it will be – not to forget the total time taken to move everything over.
Property taxes
Sometimes, your property taxes are included in your mortgage, though this is rare. What tends to happen is you have to pay property tax every year, and it can be split into monthly payments. While not an initial cost to worry about, this is something that can catch you by surprise if you’re not careful. In some areas of the country, property taxes aren’t that big of a deal. However, in some places, you might have to pay over 2% of your property’s value in tax – that can really add up! It means that your home is more expensive than you initially thought when you take the taxes into account.
The moral of the story is to take all of the different costs into account before buying a home. Before you even start bidding, work out how much you’re likely to spend on things like closing costs, moving costs, and property taxes. This will help you work out a more realistic budget when buying your house, letting you bid better and avoid overspending.