7 First Time Home Buyer Costs You Would Have Least Expected

So, you are all set to buy a new home. Let us first congratulate you for reaching such a level where you can plan to invest in one such valuable asset. Now, moving to the more serious concerns, what do you think you will have to pay for your new house? Well, of course, you will have to pay the price and you might already be preparing for the down payment, there are many other costs associated with a home purchase transaction.

It is surprising how home-buying costs can increase so rapidly, making the new home buyer overwhelmed. The leading pricingvanlines.com state to state movers who have helped several home movers help relocate to their new home, state that it is evident how stressed new home buyers are when they are moving to the new home. This is because they were not prepared for all the additional costs they are facing even after paying the price of the property.

So, we want you to be prepared for all the charges that you would have to pay. Here are some of the important costs associated with the purchase of your new home. We have made this list of seven unexpected costs that you must know about before signing on the dotted lines:

1. Earnest money:

Earnest money is a deposit that a home buyer has to show with their home purchase application. The Earnest Money offers the seller a sense of reliability as the money acts as a commitment that you are a credible buyer. If you have a successful proceeding of the contract the money is utilized in paying for your down payment as well as the closing costs. You should not be worried about the money even if the contract does not go through, there are enough provisions that ensure that the money is paid back to you in time. However, it is not easy to step back from a contract claiming that you are no longer interested in the house you will have to give legitimate reasons, and hence reviewing the contract before paying the earnest money is important.

It is important to know that earnest money is usually one to two percent of the total purchase price of the house. When you have earnest money readily available with you, you can ensure that your contract for the house moves faster.

2. Cost of inspections appraisals:

There is no way you should avoid or overlook the importance of appraisals and inspections. While appraisals help you identify the right purchase price of the property and ensure that the asking price is accurate, inspections ensure that the property is worth the price.

Buyers are the ones who have to initiate the appraisal process and the cost can be several hundred dollars. You can always try and negotiate the price with the seller of course.

With home inspections, homebuyers can gain a better sense of security. You can ensure that the house is in perfect shape and you won't get shocked or surprised by termites, water leakage, electrical failure, or any such similar thing. If you find any such issues which you think can be worked upon and corrected, you can as well choose to negotiate with the seller and get an affordable price. Or, even better, you can ask the seller to address the issues for you before you but the house.

3. Insurance cost

You need to pay attention to the insurance aspect. It can be tricky but by dividing it into three categories- homeowners insurance, mortgage insurance, and supplemental insurance- to understand it easily.

Homeowner insurance: Homeowner insurance is very important as it helps in paying for a range of expenditures such as the cost of rebuilding your home, protection cover for personal belongings, protection against liability claims, and more. It is a compulsory requirement for many lending institutions to ask homeowners to buy the homeowner's insurance and pay for a year before you get loan approval from them.

Mortgage Insurance: if you can pay more than 20% of your home cost on your own, you won't have to buy Mortgage Insurance. The cost of mortgage insurance is otherwise added to the monthly EMIs or closing costs.

SupplementalInsurance: If your home is located in a risky area like floods, earthquakes, or any other aspect, you must buy supplemental insurance. Most of these risks are covered under the homeowner's insurance policies.

You should engage with an insurance agent and ask for the best options.

4. Payment of Escrow fees and accounts:

Escrow is an important part of the process and an Escrow officer ensures that the entire process of payment is smooth and all parties involved are paid in the right manner. Usually, lawyers or title company representatives play as Escrow officers. However, having an Escrow officer also means that you will have to pay him as well. The cost of engaging an Escrow officer is split between the buyer and the seller of the house.

You will also have to get an escrow account to pay the property taxes and insurance. The account offers an assurance to the buyer that the costs will be paid in time.

5. Cost of utilities:

As you are a first home buyer, we assume that you had lived in rented homes previously. This means that you need to pay for the utilities separately. The cost of electricity, water and gas connection can be a surprise for you, if you did not pay attention to this aspect. Some of their utilities that you will have to pay for include sewage, trash, recycling, TV, and the Internet. The utility companies will check your credit history and ask you for a deposit.

6. Cost of Home improvements, additions, and maintenance

It is very normal for homebuyers to undergo some renovations, repairs, and maintenance work on their own. This means that you must have additional money for you to pay for such expenses. Most of the time these are the cosmetic upgrades that you would voluntarily choose to make. For this, you must have money separately.

These are some of the common unexpected costs that you must prepare for before you buy a house. Knowing what you have to pay makes the home buying process easier. You can buy your dream home and then make your life perfect as you relocate to it.