Buying a house is already a stressful endeavor. The last thing you want to deal with is a surprise expense that could put a strain on your budget. So, prepare to encounter these expenses after you put your bid on a house.
Closing Costs
When you first broach a deal over buying a house, you submit a downpayment. This is a significant lump sum that acts as insurance to guarantee that you’re serious about completing the deal. However, the downpayment isn’t the only expense you should expect to pay before your mortgage officially begins. To access ownership, you’ll have to cover the “closing costs” for your housing deal.
What are closing costs? Closing costs are a collection of fees and taxes related to the real estate transaction. They are typically 3%-6% of the house’s price. These are some of the fees you can expect in your closing costs:
- Attorney fees
- Property appraisal fees
- Survey fees
- Origination fees
- Inspection fees
- Discount points
Mortgage Insurance
You may have to pay for mortgage insurance. Lenders often ask borrowers who make lower down payments to sign up for mortgage insurance — this policy is meant to protect the lender in case of default.
The good news is that you don’t have to cover this additional expense forever. You may be able to close the policy after covering 20% of the home’s mortgage value.
Emergency Repairs
Most buyers ask for a general home inspection before signing the dotted line. Home inspectors will confirm the condition of the house and let you know whether there are certain areas that are in disrepair and not functioning properly.
The general inspection won’t cover every single problem area in the house — only the ones that are clearly visible to them. Your home inspector might not catch a problem that’s hidden, that’s not part of their inspection list or that’s developed once they’ve left. Even after an inspection, it’s possible to enter your new house and immediately make some repairs.
Naturally, you will increase your risks of dealing with this issue when you waive the home inspection contingency and buy the home “asis.”
How can you prepare for emergency repairs? Before you seal the deal on your home purchase, you should set up an emergency fund. An emergency fund can help you manage urgent, unplanned expenses around the house.
If you don’t have enough savings in your fund to cover an emergency repair right away, you should turn to an alternative payment method, like a credit card with a low balance or an online loan. When searching for online loans, pick options that are explicitly available in your state of residence. So, if you live in Little Rock, you’ll want to search for loans in Arkansas to handle your emergency. Narrowing your search will speed up your borrowing process and make sure that you only get options accessible to Arkansas.
Service Charges
Changing your address can come with some surprise service charges. When you connect the utilities in your new house, you will have to pay set-up fees. If you own a vehicle, you will have to change the address on your license, registration and insurance — which could come with extra charges. While these costs aren’t monumental, they can be a surprising source of frustration when you’re in the middle of moving house.
Don’t get caught by surprise! Prepare to encounter these four expenses when you’re buying a new home.
