When you're budgeting to buy a home — especially your first home, saving for a down payment is probably at the top of your list. Then comes your monthly mortgage (principal, interest, taxes, and insurance). At this point, many homebuyers start thinking they're in the clear. Not so fast!
The truth is — there are far more costs involved you might not have thought about that will affect your overall budget. And those costs, if not added in, can be enough to throw a monkey wrench into your home-buying plans.
Here are five hidden costs that can really add up:
- Home Inspection Costs
One of the most important steps you'll take after having your offer accepted is the home inspection. It's an assurance that the home you're interested in has no hidden problems. You may be okay with some cosmetic fixes or even a kitchen replacement, but sometimes it's the things under the surface or the age of the home that can create unforeseen costs. Inspectors look at plumbing, appliances, and heating/cooling systems during their appointment. They may even refer you to specialists, like pest inspectors, if they see signs of something that concerns them. Many people don't factor in the hundreds of dollars you may end up spending on inspections, but that up-front cost can save you thousands in the long run.
You may know that you'll be paying taxes on your new home, but many people don't understand you may be paying for a couple of months of those taxes at closing. On top of that, you may be paying for a year of homeowners insurance and any homeowners association fees due as well.
Your costs for electricity, gas, sewer, and water could be higher depending upon where your new home is located. You should also budget for garbage collection, Internet, cable, and phone expenses.
- Maintenance, Repairs, Renovations & Redecorating
Regular home maintenance (cleaning windows and gutters, landscaping, minor updates) is estimated at one percent of your home's value each year. This does not include larger, unexpected repairs that may happen.
In addition to maintenance and repairs, allow for renovations and redecorating you may undertake when you move into your new house to make it your home.
- Moving Costs
In your excitement to find and buy a home, it's normal to overlook the cost of moving. Moving can end up being a huge expense that you'll need to prepare for. There is a wide budget range depending on the route you take — hiring movers or a DIY move. But no matter what you choose, you'll be looking at paying for boxes and packing materials, a truck, time, and gas. Create a moving budget ahead of time, so you have the right amount on hand. Plan and schedule as far in advance as possible, so you have your choice of movers.
If you're buying your first home, don't be discouraged by these hidden costs. With the right planning and the right real estate agent, you'll be able to find your dream home and make your purchase without any major setbacks.