Most of us have a basic understanding of what goes into buying a home. After saving enough for a down payment and getting pre-approved for a mortgage you can start your home search and make an offer once you’re ready. But before you ever set foot in that new house of yours, there are going to be quite a few costs that come up, many that you may not be expecting.
In order to prepare yourself, you should be fully aware of all the costs that go into buying a home. That way, you won’t be surprised at any point during the process.
Earnest Deposit: Although the earnest deposit is part of your down payment, it has to be made right away. This deposit is required in order to show that you the buyer are indeed serious about the property. It’s generally in the amount of 1 percent of the value of the property’s sale price or $1,000. It is just a deposit though, so you can get that money back up until the point when youremove your contingencies.
Home Inspection: Although the home inspection is generally considered part of closing costs, it’s another fee that you have to pay upfront. Home inspections are essential to the buying process since they could uncover any potential structural flaws in the property. Home inspections generally range from $300 to $500. If you end up walking away from the property due to something you found in the home inspection you’ll be out at least $300.
Renovation and Improvements: If your home isn’t in the best of shape, you may want to consider renovating it before you move in. It’s a lot easier to put new floors in or paint the walls before you have all your furniture moved in. Most homebuyers tend to forget about the initial renovation costs, so be sure to factor that into your calculations. A good rule of thumb is to assume that renovations and improvements will total about 1 percent of your purchase price. Of course, this can increase drastically depending on the condition of the house.
Move-In Costs: Any time you’re moving into a new home there are lots of major expenses to consider. Everything from buying boxes to hiring an actual moving company will add up. And the further you move geographically, the higher your costs will be. Keep in mind that if you’re moving into a community with a homeowners association, you will likely have to pay an initiation fee. Make sure that you get the details ahead of time since you don’t want to be fined by your HOA in your first week at your new property.
Read more: Extra Expenses When Buying a Home