5 Expenses That Can Surprise First-Time Homebuyers
Many costs associated with homeownership are predictable, like your mortgage payment. There are many additional costs that take homeowners, particularly first-time homeowners, by surprise. Here’s are five of the most common expenses associated with owning a home so you’re not shocked when the bills start arriving.
1. CLOSING COSTS The money you've saved for your down payment isn't the only cash you'll need to purchase your home. You'll need an additional 3% to 6% of the cost of your home for closing costs. Once your offer is accepted, you'll get a detailed list of closing costs from your lender. These include items such as lender application fees, mortgage taxes, attorney’s fees, title insurance, and recording fees. 2. HOMEOWNERS INSURANCE Homeowners insurance is required when you hold a mortgage, but it's a good idea even if you're paying cash for your new home. Your Realtor will have recommendations of local insurance carriers if you don't already have a relationship with an insurance agent. The cost of homeowners insurance varies based on a multitude of factors and it pays to get quotes from several companies. There are discounts available, for example, when you bundle coverage on your home with your auto insurance policy. Discounts may also available for having a home security system, certain types of roof construction, and more. 3. PROPERTY TAXES The amount of property tax that you will owe depends on where you live and where your home is located within that area. Your Realtor can give you an idea of the expected amount of property taxes for the home you're buying. Some lenders will roll your anticipated property tax amount into your monthly mortgage payment or you might be expected to pay your local government directly.
4. INCREASED UTILITY BILLS If you've rented before, you're used to paying a utility bill. When you go from renting to owning, your utility bill will likely change. In general, increased square footage can mean a higher utility bill. You may also see fees on your bill that you've not seen before, simply because garage service was included in your rental agreement and now it's your responsibility. By doing some research, you should be able to get information on the monthly average utility bill for the home you're buying so you can plan for that monthly expense. 5. UTILITY AND SERVICE CONNECTION OR TRANSFER FEES Many utility and cable companies charge fees for new installations or transfers. Make sure you know what it'll cost to have the electricity on and internet connected in time.