Expenses Most People Forget About When Buying A New Home

The price tag on a new home is a huge investment for any buyer, but there are often hidden costs that pop up before, during and after a sale. If you thought all expenses were accounted for, it’s crucial to look over associated costs that aren’t part of the initial principal amount. It’s easy to forget about some of the most expensive parts of home ownership.

Earnest Funds

In a shaky economy, you may need to tempt a seller to accept your bid by using earnest money. These funds are commonly a few thousand dollars offered to the seller to seal the sale deal. In exchange, the seller pulls the property from the listings and agrees to enter escrow. The money eventually applies to the sale price.

Appraisal Fee

Several hundred dollars must be paid outright to the property appraiser. This is money well-spent because they go over all the property’s amenities and report any issues. A broken HVAC system, for example, is a huge expense you’ll want to avoid by possibly looking at another property.

Home Insurance

Securing a home loan cannot happen without proper insurance coverage. Often referred to as hazard insurance, it covers certain damages as the property ages. You may also want, and in some areas absolutely need, earthquake or flood insurance too. These costs are all separate from the actual mortgage payment, resulting in a higher monthly cost for all household-related items. While this sometimes forgotten, it is money well spent to protect your home.

Closing Costs

Real estate agents and loan officers don’t work for free so be sure to add in closing costs to the final sale price. At about 3 to 4 percent of a home’s value, closing costs cover document preparation and other transition fees. It is possible, however, to ask the seller to cover these costs during negotiations.

Utilities

You may be used to a landlord who covers all the garbage, water and other utilities within a rental payment. Be aware that you are responsible for your share of the local utilities. Electricity, natural gas, water, garbage and other items are new bills you’ll have each month. Budget for them wisely to avoid any utility shutdowns.

Initial Move-In Costs

Factor in the cost of any maintenance items you want to add before moving into the property. Fresh paint and flooring costs considerable money, especially if you add in labor. Budget for these expenses so you can move in with everything prepared nicely.

Your new home will pay off in the long run, but you must account for these expenses to maintain a strong financial background and secure household. From the appraisal to the extra utilities, home ownership has extensive responsibilities worth the cost.

Informational credit to Drayden Insurance Ltd.