If you’re in the process of buying or have just bought your first home, congratulations! This is a huge accomplishment and a huge positive change in your life. Choosing a home (especially as a home-buying newbie) is no easy task, and an extremely stressful process to go through once you’ve found a house you’re really excited about (especially if there’s competition for it!).
Whether you’re amidst the process still, or have recently closed on your first home, it’s incredibly important to know about and educate yourself regarding fees and the possible hidden costs that come with the home-buying process. To make sure you’re prepared, read our tips below for the hidden costs you might not anticipate when buying a new home.
- “Earnest Money”
The concept of earnest money comes up once you’ve filled out your application to buy your home. This money acts as a statement of intent of sorts, and lets the seller know that you’re serious about the process and committed to buying this home.
The money, which generally is about 1%-2% of the total purchase price of the home, will be applied to your down-payment and closing costs if your offer is accepted. Only put your contract in motion if you’re really interested in the home – you don’t want to back out just because you’re not interested anymore after putting money down.
Make sure to have your prospective house appraised and inspected by professionals before putting in an offer or any money down on it. Some inspections are included in the appraisal process, and some will need to be booked separately.
However, both are extremely important to make sure you’re getting a good value for your prospective home, and that there aren’t any possible problems or huge issues with the house itself before you buy.
Before you buy, make sure you start researching reliable insurance companies for the various kinds you’ll need for your home. There are 3 different kinds of insurance you’ll want to research: homeowners insurance (to cover repairs, personal belongings, and liabilities), mortgage insurance, as well as supplemental insurance (to cover any extreme weather damage or natural disasters).
Most lenders will have you purchase homeowners insurance before approving your loan, and will add the cost of your mortgage insurance on to your mortgage payment or closing costs (or both). Supplemental insurance is usually optional, but can be a real life-saver for those in areas prone to extreme weather patterns or flooding.
If you’ve been renting thus far, it might slip your mind that your home will probably not come with appliances or with various furnishings. Make sure to set aside a budget to make sure that you’re ready for any big appliance purchases you might need to make sure are covered.
Additionally, discuss with your seller as to what will come with the house, what won’t and what might be included for an extra fee. You’ll probably need to get a new washer and dryer, and (odds are), probably a stove/oven and refrigerator for your new home.
When making your first home purchase it’s easy to feel overwhelmed by the whole process – even if you’ve found the home of your dreams! Take it day by day, and make sure you’re fully prepared for the costs involved and anything that might get thrown your way.