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11 Hidden Costs of Buying a Home

Do not buy a home until you have taken into consideration the hidden costs that come along with it. You want to be sure that you are setting yourself up for financial success investing in a home, and not paving the way to being house poor. This blog will uncover the hidden costs of buying as well as how to prepare for them.

My name is Bailey Beckman. I’m a residential real estate specialist that believes in the power of education! If you want to stay ahead of market shifts this year, be sure to subscribe to my youtube channel.

So we all know that buying a home isn’t cheap, especially in today’s seller’s market. But it is another thing entirely to buy a home when you have not budgeted correctly. Fancy real estate shows have triggered a new level of "Keeping up with the Joneses" and buyers can find themselves “house poor”. What this means is using ALL of your money to purchase a home, and then not being able to do anything else such as go out to dinner or travel. My goal is to help prepare you for the costs of owning a home and then working with you to find a home that fits your needs in an affordable range.

#1 | Closing Costs

These are in addition to your downpayment on a home. When you are budgeting, add in an additional 3-4% of the purchase price to set aside for the fees that it will cost to close the loan. This includes title work, lender fees, etc. 

#2 | Inspection Fees

Now most people anticipate the fee for the general inspection which is around $500, but you may want to add more inspections to protect yourself before making a huge financial investment into a home. Other inspections can include a Radon test or a camera scope of the sewer line. Check out my video on inspections if you are curious about the inspections that I recommend! Top 5 Home Inspections

#3 | Property Taxes

Before submitting an offer on a home, make sure that your lender has correctly accounted for the city’s tax in the monthly mortgage payments. Say the property tax is $3,000 per year, that adds $250 per month to your payments.

#4 | Private Mortgage Insurance (PMI)

This only comes into play when your down payment on the home is less than 20%. It’s an additional fee that adds protection for loan servicers. It does automatically drop off after you have paid off 22% of the home loan. You can also have it removed early in some circumstances… That video will be available on my channel soon if you like to learn how. 

#5 | Appraisal Fee

Some buyers are surprised when they have to pay for this step during the buying process as it can come in around $700. Be sure to check with your lender if payment is required up front for this or if they have it paid in closing costs. 

#6 | Home Utilities 

If you are moving from a rental space into a home with more than 2000 sq ft, your electric bill might shock you the first month. I recommend asking the seller for a sheet detailing the average monthly cost for utilities. These can include:

  • electric
  • natural gas
  • water
  • sewer
  • trash/recycling
  • internet.

Rural properties you will want to take into consideration how often the propane tank needs to be filled as well as if the septic system needs to be pumped regularly. 

#7 | Moving Expenses 

Even if you aren’t planning to hire a moving company, there are still extra expenses that come with moving. This can include boxes, truck rentals, or even paying off friends for help. As well as disposal of items that you are no longer in need of! 

#8 | Pet Licensing Fees

Now these aren’t going to break the bank in most cases, but you still want to be sure you are prepared and take into consideration the cost to license your pet and how often the renewal needs to be done.

#9 | HOA Fees

If you are buying, you will also need to pay special attention to the HOA fees. This can completely impact your hunting price range and affordability. For example, a $250,000 home with a $300/month association fee is the same monthly payment as a $295,000 home. 

#10 | Home Repairs

There is no such thing as a perfect home and I can almost guarantee in your first year of ownership something will need to be repaired. Even after a home inspection, there may be items that break or need replacing soon after you purchase a property. I recommend budgeting 1% of the purchase price of the home to set aside, just in case. 

#11 | Outdoor Appliances 

Here in Minnesota, the winters can get brutal. You need to be prepared with shovels, an ice pick, salt, and maybe even a snow blower. 

The final hidden cost is the one that got me when I bought my first home. I have a very large driveway and I tried to cut corners buy purchasing a used snow blower. It of course only worked once. I was out the money and had to shovel by hand the remainder of the year, which on average would take me about 3-4 hours every time it snowed.

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There you have it! The 11 hidden costs of buying a home. Now you will be more prepared when you start looking at homes and your range of affordability. 

 

Download my first time home buyer guide if you are ready to start your own home ownership journey. Thanks for watching! 

 

 

 

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