Unexpected Costs When Buying A Home
Your home is most likely the most expensive thing you’ll ever own. Even with all of that research you are likely doing, there are often a few expenses that go overlooked in the hustle and bustle of the process, especially by first-time home buyers. Luckily, I have compiled a quick list of the more commonly overlooked costs in the home buying process. For more questions about the price of buying a home, I will be happy to help guide you.
1. Mortgage PITI
PITI stands for principal, interest, taxes, and insurance. While most home buyers are aware of the principal (the amount you owe before any interest accrues) and the interest (the fee you pay your lender each for borrowing the money), they often overlook the taxes and insurance. Taxes are often overlooked costs of homeownership. The most expensive tax you’ll pay as a homeowner is property taxes, which vary by location. The general rule is about $2 for every $1000 of your home’s value in property taxes. So a $250,000 home would run between $450 to $500 a month in property taxes.
The other side of this is homeowners insurance. While most states do not require this, most lenders require that you maintain at least a certain level of property insurance as a loan condition. Homeowner’s insurance covers your property in the event of a fire, break-in, or lightning storm. Other plans may offer additional coverage, like earthquakes and flooding (a must-have in Houston). As a general rule, expect to pay about $3.50 for every $1,000 of your home’s value in homeowner’s insurance per year. In this example, you will pay $875 on a property worth $250,000 per year, or about $73 per month. The full PITI is the average total of your mortgage per month.
2. Earnest money
Think of this as a form of security deposit. Essentially, it is what you put down upfront before even filling out paperwork - it’s meant to prove that you are serious about purchasing the property. Once you buy the property, the earnest money is returned to you or credited towards your home purchase, but if the transaction does not go through, there is a chance you may not get that money back. Click here to learn more about the ins and outs of earnest money.
3. Moving Costs
As obvious as this one may sound, many people often forget that buying a home means moving everything from one location to another, which can be costly, especially with long-distance moves. You’ll need to consider moving vans and crew, boxes, the time it takes to pack, time off work, etc. All of these things have both a literal cost and a physical and mental cost on the home buyer. Ensure to include this in the cost of homebuying as it can be much more expensive than it may seem.
If you need more help managing all the costs associated with homeownership, you’ve come to the right place. Contact me today to set up an appointment.