Costs to Consider When Buying a New Home

June 25th, 2018

One of the biggest decisions most people ever make is the decision to buy a new home. When you are looking to buy a home, it is important you build a conservative budget and do not overspend. To ensure you make the best home buying decision possible, there are several different types of expenses that need to be taken into consideration when determining your home buying budget.

Closing Costs

One of the first expenses you will incur for your new home is your closing costs. Closing costs can end up costing thousands of dollars upfront. These can include costs for appraisals, home inspections, transfer taxes, title fees, legal costs, bank fees and a range of other expenses. While these can be significant to pay up front, you can often negotiate a credit from a seller to cover some or even roll the costs into your mortgage and pay a slightly higher interest rate.

Mortgage

The most significant expense you will incur on a monthly basis will generally be your mortgage payment. While interest rates on mortgages are near an all-time low, a monthly payment can still be a major cost you have to take into consideration. Since it is such a big expense, it would be beneficial to shop around for the best mortgage rate you can get prior to closing on the purchase. Even a slightly lower rate could save you thousands of dollars over the course of the loan.

Taxes and Insurance

Beyond the amount of money you pay on your mortgage payment, you will also have to pay property taxes and insurance. In the majority of situations, your mortgage lender will require you escrow for these expenses. The amount of money you pay on property taxes and insurance will vary significantly from one city to the next. Generally speaking, the more the house is worth, the more you will have to spend for both. To save money on these, you should always look for ways to appeal your property tax bill and shop around for a better home interest rate.

Maintenance

While your mortgage lender will likely only require you to pay your mortgage payment and tax and insurance escrow on a monthly basis, there are other expenses you will continue to incur. One of the expenses you need to take into consideration is your maintenance costs. These costs can include all costs it will take to keep your home clean and in good condition. In general, you should expect to spend around 1% of your home value per year on maintenance. However, the exact amount you spend will vary from one year to the next depending on whether any major repairs are necessary.

Upgrade and Furnishings

When moving into a new home, you may also need to spend a lot of money on new furniture. Over time you will want to make upgrades to the home to keep it modernized and retain its value. While these costs can be expensive, you can normally obtain great financing options from the major furniture and home repair stores as long as you have a good credit score.

While buying a home does come with a lot of expenses to take into consideration, owning a home is a great long-term financial option as it can help you build significant personal equity.

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