Home Purchase Common Expenses That Baffle Home Buyers
It is a common observation that real estate transactions usually close with sugar coated facts. But from a buyer’s perspective, a home purchase is a long term investment and an expensive one. Oftentimes buyers spend months or even years to just save up the down payment.
And after all this hard work, planning and budgeting, the last thing you would want is to pay any unexpected expenses.
These unexpected expenses, regardless how small or big, can easily derail a house buying process or at the very least, it may cause great financial stress to something that should be a milestone in the buyer’s life.
To avoid this from happening and to have a pleasant home buying experience, a home buyer must keep his eyes wide open for all the unexpected expenses. To help you stay prepared, here are some of the most unpredictable expenses that may surprise a first time buyer.
Home Purchase Emergency Fund
At any point during your home buying process, even a small glitch may completely throw the entire process for a loop.
Often, the only way to keep things running is to keep an extra chunk of cash. For instance, how would you meet the lender’s loan-to-value requirements in case of a low appraisal?
A lender may refuse to give you a loan. But if you do have a few thousand dollars and the appraisal is off by a small amount, the seller and buyer may meet in the middle and make the deal work.
Odds and Ends of Moving Day
Regardless if the excitement of moving out has made you pay hundreds of dollars to the moving crew for packing up and moving your belongings, or even if you plan to offer pizza dinner to your best friends for their support, throughout the process, you would still need to pay for plenty of other moving expenses.
This may include;
- Bubble wrap, boxes, and other moving supplies
- Cleaning supplies
- Deposits for utilities
- Appliances not included in the house purchase
- Pre-move-in upgrades like a new floor, paintings, or closet organization
As you wait to move out, make an estimate of all these costs. Pad your pre-decided moving budget a bit to make sure things go smoothly. There is always a temptation to keep buying new appliances or furniture for the new house, but don’t get into this trap unless it is something you’ve budgeted for.
Home Purchase Closing Cost
On an average, the closing cost may range from 2% – 5% of the overall home’s purchase cost. For instance, if you are buying a $200,000 house, it will be in between $5000 to $10,000. This cost helps to cover items such as;
- Title insurance
- Loan origination fee
- Pest or home inspection fee
- Mortgage insurance or prepaid property taxes
- Recording Fees
- Underwriting fees
It is a common practice that buyers’ put aside the closing cost but one cannot have the clear idea of the cost unless they receive a GFE – Good Faith Estimate from the lender, after applying for the mortgage.
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