What Are The Costs of Buying a House?
The cost of buying a house is much more than simply buying the house itself.
Whether you’re looking to live or invest in a new home as part of your investment portfolio, there are many aspects that will impact the costs of buying a house in 2021.
A mortgage quote may determine that you can afford a particular house, but the costs of buying a house go beyond simply being able to pay back the mortgage. There are significant upfront costs when buying a home that should be taken into account when you are ready to become a homeowner.
Whether you’re looking to live or invest in a new home as part of your investment portfolio, there are many aspects that will impact the costs of buying a house in 2021. A mortgage quote may determine that you can afford a particular house, but the costs of buying a house go beyond simply being able to pay back the mortgage. There are significant upfront costs when buying a home that should be taken into account when you are ready to become a homeowner. They are the downpayment, insurance, taxes, and closing costs that can bump up the costs.
Down Payment Costs of Buying a House
In essence, you need a downpayment in order to secure a mortgage with a lender. A downpayment is a certain percentage of the sale price that you will pay upfront before buying a home. The rest of the cost of the home will be paid for by your mortgage.
For example, if you’re buying a $300,000 house and you have a downpayment of $30,000, then your mortgage lender of $270,000 will lend the rest while you repay them over time. However, the more money you can put towards your down payment the better. The amount of the down payment needed for the loan is based on the price of the home, the type of property, and the loan product that is taken out.
Property Taxes Will Impact The Costs Of Buying A House
Depending on where you plan on buying your property, the city or country government will require you to pay property tax. Property tax will be necessary for as long as you own the home. This will typically be included as part of your mortgage payment but not a part of the interest and principal loans.
However, the assessed value won’t be the same as the price of the house. If the property value increases in your area, your city or county could assess your home at a higher value. That means that you’ll likely spend more on property tax. Also, when you purchase a new house, the previous owner's taxes will likely change following the new tax year after your purchase and depends on if you homestead the property or not, veteran status amongst other things. In 2018 the property cap was 2.1%, then in 2019 was capped at 1.9%. The Florida Department of Revenue helps determine the caps every year. The yearly increase in property taxes (aka. ad valorem) generally increases annually. The increase cap is based on the Consumer Price Index (CPI) or 3%, whichever is less.
Insurance Costs Of Buying A House
When you buy a house, you need to take out homeowners/flood/wind insurance that will financially protect your home from unexpected events.
Natural disasters or perils, theft, and vandalism all count as unexpected events that can be handled with proper homeowners insurance. On the most part, homeowners insurance is not a legal requirement, but some mortgage lenders will require it to protect the loan. The cost of homeowners insurance will vary, so make sure to take the time to compare offers to make savings where you can.
Closing Costs of Buying a House
Closing costs are the fees needed to close on the house. Covering these fees can be negotiated as part of your offer and can be capped depending on your mortgage program. Some fees are split between the buyers and sellers, such as title. They will typically be a small percentage of the home’s purchase price. You may request a preliminary closing disclosure by the title company to see how much title costs might be. These costs will depend on each transaction between the buyer and seller. However, the buyer will usually be expected to cover the costs of inspections, appraisals, title costs, and loans.
The Appraisal Fee
Mortgage lenders need to know that the property is worth as much as the amount you want to borrow. The appraisal should cost a few hundred dollars, the cost also depends on the property type and area, such as single family residence, multi-family vs PUD or condo. You may also request to see if there is a ‘rush’ fee if your concern is time on getting the appraisal back.
Home inspection Fee
Insurance companies will more than likely require a home inspection. They want to know any risks to the property in order to provide you a better insurance rate. Insurance companies will need to know if a home is structurally sound enough to live in. Inspections that return results that are troubling may mean being able to negotiate a lower selling price. If you and the seller are unable to negotiate an agreement about how to fix the issues, you might be able to back out of the contract. Depending on how the contract is written, consult your real estate agent if you have any questions.
Survey inspection Fee
Title companies will generally require a survey for any PUD’s or single family homes. The boundaries of a parcel are called the metes and bounds. Make sure to keep your new survey as anytime you want to refinance, you more than likely will need to present this.
Loan Fees Cost of Buying a Home
There are certain other fees that are associated with the loans needed to buy a home. These are:
The processing fee to cover the processing costs for your loan request
Underwriter fees are lender costs that are generally a fixed amount. This cost is collected from the loan once the loan is closed.
Prepaid interest will be required by most lenders to pay the interest that accrues on the mortgage between the settlement date and the first payment