If you're shopping for a home, what costs do you need to consider? Sure, there's your interest rate, down payment amount and the monthly mortgage payment. Although most people may stop there, the list actually keeps going. What else should you plan to pay for?
Inspection & Appraisal Fees
Fortunately most homebuyers only pay these fees once, or maybe twice, during the course of home ownership – when you purchase a home, and occasionally when you sell (usually the buyer pays for inspection and appraisal fees).
Appraisal costs vary depending on the size and location of the house, but recent estimates found buyers paying about $300 or so on an appraisal when purchasing.
Home inspection costs vary as well, but are usually in the same ballpark. Condo and small homes under 1,000 square feet cost about $200, while larger homes over 2,000 square feet will cost about $400 or more.
Unlike appraisal and inspection fees, you will pay taxes on your property throughout the life of your ownership. Property taxes vary depending on your location, but typically go towards local expenses, such as parks, schools or sidewalks. Property taxes are usually determined based on your home and property's estimated value. They can - and probably will - change over time. To find out how much you might plan to spend on property taxes, ask for the seller's current annual tax on the property. Some listing agents, like Zillow, even include tax history amount and how it's changed in the home's listing.
Home Association Fees
If you're looking at buying a condo or home in a planned development, then you'll likely pay homeowners association fees, or HOA fees. HOA fees are then used to keep up aspects of the community, like swimming pools, parks, golf courses, etc. Depending on the type of development or condo, HOA fees can range from a few hundred dollars a year for simple developments without a lot of amenities, to $400-$500 for condos with pools, gyms or other features.
If you are buying a property with substantial HOA fees, then be sure to do your research about how the HOA works before you buy. Fees can increase and some associations can vote for building-wide projects with costs that all residents are required to carry, like window replacement or repaving the parking garage.
If something needs to be fixed or replaced in your home, guess who pays? This is significantly different than renting and owners should plan to have a cushion in their emergency fund to pay for things like having a tree on the property limbed, a new water heater, fridge or roof repairs. HomeAdvisor.com offers a helpful list of the average cost of replacing appliances. Major home repairs might be few and far between, but they carry a hefty price tag.
As a homeowner versus a renter, you also want to consider what you'll pay for property upkeep supplies such as lawn mowers, rake, water hoses, weed eater and more. Minor repairs and other needs are much more common than major repairs. Services that you might have to pay at least once or twice for include pest control treatments, installing a new light switch or other light fixture, and calling a handyman for small repairs like a leaky faucet or broken tile.
Almost all lenders require borrowers to have insurance on their home. The type of insurance and what it covers will typically vary depending on the location and the construction materials of your home. If you're in an area that's subject to natural disaster, you may also need supplemental insurance to cover an earthquake or flood. Regardless, your home insurance will likely be an increase of your rental insurance – if you had it. Be aware that insurance rates will likely change over time. One recent study as to the average annual premium for homeowners insurance across the country put the cost at $952.
Ready to make a move? Whether your next move means creating a monthly budget for the first time or possibly buying a home, your neighborhood branch is here to help. Happy hunting!