Costs First-Time Homebuyers Often Forget to Consider
Buying a home is not as cut and dry as signing on the dotted line for your future mortgage payments. Almost half of the homebuyers report they did not expect the additional costs required to purchase their home. This can be especially shocking to the first-time homebuyer.
Approximately 21% of buyers are surprised with their closing costs when purchasing their new home. These closing costs can average 2-5% of the home loan amount. Closing costs include appraisals, land surveys, transfer taxes, policies, and settlement and recording fees. In 2020 the average price of closing costs when purchasing a home was $6,087 for a single-family dwelling.
Along with closing costs, approximately 16% of buyers had not factored in home insurance, property taxes, moving costs, and home inspections to the price of their home. This can be a significant amount of additional, unexpected fees. It is important to research these additional fees prior to purchasing your first home.
Unless you have strong friends and family with pickup trucks willing to help you move to your new home for free, you will need to factor in a moving fee.
The average long-distance move can cost you $2,200 to $5,700 and a two-person move within 100 miles can run $800 to $2,150. Nationally, the average move to your new home will be approximately $1,400.
Repair and Remodeling Costs
Most first-time buyers expect to move into their new home with no changes or repairs needed. Less than 50% of buyers factored in the possible need for restoration and renovation. Home inspections can greatly reduce any surprise repairs, especially if you have already purchased a home at the top of your budget.
Home Inspection Fees
Some first-time homebuyers might frown upon a $300-$600 inspection fee but this is much more economical than handing over $50,000 for an unexpected new foundation.
Most real estate experts advise paying for a home inspection before purchasing your home. Your home inspection report should include plumbing, electrical, attic, roof, air/heating, windows, doors, ceiling, and foundation.
Most first-time homebuyers are not familiar with Title Insurance. Title Insurance ensures that the person selling the home is doing so legally. They are in place to make sure that there are no debts or liens on the property that you could end up being responsible for.
By shopping around to lenders, you can negotiate some things such as credits or percentage points that will lower your closing costs or mortgage rates. The buyer also has the option of including some of the closing costs into the mortgage loan. Be aware that this will increase the size of your loan that you will be financing for years to come.
It is important that you have a trusted Realtor on your side to help guide you to respected inspectors and lenders with a good reputation in your area. The more prepared and informed that you are, then the better your outcome in your future home.
Buying a home, for most, will be their biggest financial commitment in life. Being aware of the hidden costs will help make this a pleasant and memorable experience for years to come.