Buying a home is easily one of the largest financial decisions you will make in your life and invariably your finances are going to be stretched in trying to get the deal done.
The actual homebuying process can be a financially challenging with any number of unexpected expenses seemingly trying to derail before you get over the line and pick up those keys, and that’s before the household bills start to fall through the letterbox. No one likes unpleasant surprises, especially ones that cost you money, so here is a look at some of the expenses you should budget for so you are more financially prepared for what lies ahead.
Leave some room
If you have been renting and have saved up a deposit in the meantime, you will no doubt be reading through realtor reviews and looking for an agent who can help you find the house you want, but it is important to remember that although a large down payment is a good idea and probably needed, you should not over-stretch your finances to the point where you have not left yourself with something in reserve to deal with any financial emergencies or unforeseen expenses.
There are some fees associated with homebuying that you are probably aware of already and have to be paid immediately you start the mortgage application and buying process. You will have to pay an appraisal fee as part of the loan approval procedure and this can be anything up to $1,000 depending on the location and purchase price of the property you want to buy.
In addition to the appraisal fee you lender will want to arrange a professional home inspection to assess the condition of the property and confirm if it is worth what you are intending to pay for it. The fee for this inspection is somewhere between $300 and $850 on average, depending on the age and type of structure of the property being inspected. An older home can cost more as there are additional aspects that need checking such as the condition of the structure and whether there is any evidence of infestations such as termites, which is less likely to occur in a newer property.
You should take the age and condition of a property into account when working out what costs you might be facing for repairs or renovations and take note of what is in the report to decide if you could be facing some financial costs that you may need to budget for if you go ahead and buy the property.
One thing that often catches buyers out is extra closing costs. You will have been provided an estimate of the costs involved from your lender but remember that this is just an estimate and you may not know the specific sum of money you have to bring to closing until a few days beforehand.
Allow for a margin of error and hold back a sum of money so that if you need to find another $200-300 in extra closing costs at the last minute you are not left delaying closing because you have to try and arrange some extra funds to get it done.
If you happen to be buying a property in a subdivision there are probably some homeowners association fees to pay, either annually or monthly as your contribution towards the upkeep of the common areas. Check when these fees are payable and whether you pay monthly or annually as they might need to be paid as soon as you move in, which could leave a dent in your finances.
Previous property costs
An issue that often gets overlooked when working out a budget for moving is what you have to pay in termination fees and final bills when you move out of your existing property. Check your internet, utility bill and service contracts and see if there are termination fees to be paid or costs that you need to budget for, before you start paying for services at your new home.
Another good bit of advice would be to draw up a list of what you household items need for your new home rather than simply going out and buying what you need without keeping an eye on the costs.
The more financially prepared you are for your move, the less likely it is that you will troubled by any unexpected calls for your cash.
Michael Chapman enjoys his long career in real estate. Always a number cruncher, he especially appreciates writing about money matters of buying and selling in today’s housing market.