YOU’RE GONNA DO IT, YOU’RE GONNA BUY A HOUSE! For first time home buyers, it may first appear that the big financial layout is the down payment and the selling price for the home. However, there are a few more not-so-obvious costs for which you need to be prepared. I’ll walk you through a few of them so you can go into homebuying ready and fully aware!
1. Property Taxes. These fund your local schools, libraries, and fire departments. The amount is based on your state’s guidelines and the value of your home. Once the home’s value has been assessed by a tax expert, they will multiply the number by the local tax rate (generally $1 per $1,000). Remember you’ll have to pay the current owner a portion of these if they have already paid for the year.*
*New homeowners, have you filed for your Homestead Exemption? Click here for more guidance.
2. Homeowners Insurance. Purchasing a house requires you to buy homeowner’s insurance and make a few payments before the sale of the house closes. This ensures that you have a policy in place before you take possession of the house. Homeowners insurance covers four types of home incidents and will be specific to your location. I would recommend that buyers start shopping for insurance quotes immediately, getting a price once your hoped-for home has been identified (rather than waiting until you have submitted an offer or your due diligence is up).
3. Private Mortgage Insurance. If you have decided to utilize an FHA loan for a lower down payment, you will be required to carry Private Mortgage Insurance (PMI). It often combines with the up front down payment, but can also be rolled into your mortgage. You should expect to pay up to 2% of the mortgage for your PMI every year.
4. Inspection Fees. They may not be always required, but it’s definitely recommended that you get an inspection on your potential new home. An inspector will check for potential safety issues such as mold, pests, and unstable structure. That way you know what you are getting into, and can always back out if the inspection shows that the cost of repairs will be too extensive. They may cost you several hundreds of dollars, but an inspection is infinitely preferable to thousands of repairs you didn’t know would be needed. While home inspection is not required in Georgia, it is a caveat emptor state--literally meaning, buyer beware. All buyers in Georgia should exercise the right to inspect.
5. Closing Costs. Most of these are one-time fees generated during the buying process and are generally lumped together to be paid at closing. These can and should include a title survey fee, document preparation fees, credit report fees, and title insurance, as well as transfer tax, prorated taxes and insurance, survey, and loan origination fees. These are a buyer cost to purchase and obtain a loan, but can be negotiated with seller to be contributed at closing.
6. Maintenance. This isn’t directly related to the sale, but maintenance on a home can be expensive—suddenly you have a yard to care for, garbage collection, etc., as well as potentially costly repairs like replacing a water heater or septic tank. Try to plan ahead and incorporate setting aside some savings as part of your “mortgage cost” in order to be prepared. You might also negotiate with the seller to have them provide a 1 year home warranty for peace of mind
Buying house can turn out to be a lot more expensive and complicated than you might first anticipate. But being aware of these additional costs will help you plan so that when you find your dream home, you are ready to go!
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Michelle M Tucker | !Daley Real Estate | GA Real Estate License #297541