If you’re considering homeownership for the first time, you’ve probably heard that there are hidden costs of buying a house. But what are these hidden costs, and what should you expect?
First of all, if you are considering buying a house for the first time, congratulations! This is one of the biggest decisions and purchases you could make and a significant and wonderful step that most people dream of.
The key to homeownership is being prepared. If you’ve not experienced this process before, there could be some shockers down the line that can cause undue stress. But if you are aware of some common costs of buying a house, you can make sure you are fully prepared before taking this next big step.
As there are a plethora of hidden costs involved, we will break them down for you into 2 parts: the purchasing fees and home exterior, and the home interior. While this guide is by no means extensive of all the hidden costs of homeownership, it will at least give you a better idea of what to expect.
Here is Part 1 of our guide with 7 hidden costs of buying a house that deals with the purchasing fees and the house’s exterior maintenance:
One of the hidden costs of buying a house that adds to the price tag is a group of fees known as closing costs. Closing costs are the various fees for the services and expenses needed to finalize a mortgage.
For the most part, the purchaser of the home covers most of these closing costs, but there are some that the seller takes care of. Closing costs can be negotiated lower, but the average closing costs are usually around 2% to 5% of the loan amount for the purchaser of the home.
Needless to say, this can amount to a pretty substantial chunk of cash owed, and possibly a burden if you are unprepared for it. The easiest way to take care of your closing costs is with cash. However, sometimes your lender will allow you to integrate the closing costs into your overall loan amount. But this means you would have to pay interest on your closing costs over time as well as your mortgage. There also may be special circumstances if you are a first-time homebuyer that allow you not to have to pay closing costs. Although this is rare.
A couple of other hidden costs of buying a house to prepare for if you’re a first-time homebuyer are homeowners insurance and mortgage insurance.
Before taking out a mortgage, your lender will likely require you to show proof of homeowners insurance. Homeowners insurance covers losses and damages to the house itself, and also to items within it. It also provides liability coverage for accidents that could potentially occur on your property. Homeowners insurance is usually lumped into your mortgage bill, so this is a hidden cost of buying a home that needs to be factored into your purchase budget.
When buying a house, the standard amount that needs to be paid out of pocket for a downpayment is 20%. But if you don’t have that saved up yet, don’t give up! This just means that your lenders might require you to also take out private mortgage insurance (PMI for short) to lessen their risk on the deal. This is usually added as another one of those “closing costs” we mentioned above.
Another one of those sneaky hidden costs of buying a home to be aware of is property tax. If you’ve never owned property or a house before, welcome to your newest recurring tax to put under your belt. Feel free to loathe it (don’t we all), but it is a factor that must be prepared for.
Property tax amounts are based on the local tax rate and your property value assessment. As this calculation will vary significantly between towns and homes, location plays an extremely important role in determining a house’s overall affordability. This amount will not go away. In fact, it will likely increase over time depending on your location. This is usually implemented into your mortgage bill as well.
When you consider the costs of buying a house you need to consider the recurring costs of upkeep for your property, including outdoor lawn care, landscaping, and curb appeal.
When it comes to things like lawn and tree care and landscaping, you basically have two choices: do it yourself, or hire someone. If you do it yourself, you will need to invest in proper equipment (like expensive lawnmowers) and time (like your Saturday mornings). However, hiring someone comes with another recurring bill and will need to be accounted for in your monthly budget.
Your home’s curb appeal should be important to you. It helps to keep up the overall potential resale value of your home. And you might have an HOA that makes this important for you in their rules. If you’re not much of a gardener or sprucer-upper, you will need to factor in the cost of hiring someone for this task as well. And if you like to do things yourself, you still will have the out-of-pocket expense of the supplies.
Whether you live in the country or the city, pests will likely seem to love your home almost as much as you do! So unless you like having unwanted roommates creeping around your house with you such as mice, ants, termites, and other bugs, another one of the costs of buying a house to factor into your budget over time is pest control.
If you want a house with a pool or to install one on your own, you need to add the installation and regular upkeep into your costs of buying a house. Pools are definitely a fun accessory to have available! But they can also be expensive and a lot of extra work to own, so just make sure you have considered all of these factors.
Similarly, a deck or patio is a nice addition to any home. But these also require occasional maintenance to ensure it is a long-lasting and well-groomed fixture of your home.
Lastly, the maintenance of your home’s exterior aesthetics is another one of the hidden costs of buying a house that needs to be accounted for.
Whether the exterior of your house is painted or has vinyl siding, you will need to do maintenance work on it every so often. Vinyl siding will need to be power washed occasionally. If your house is painted, it should last a good 5-10 years depending on the material and the quality of the paint job. Repainting will most likely require hiring a professional, which will be an added expense.
Don’t forget to stay tuned for Part 2 of our guide on the hidden costs of buying a house that deals with the home interior!
Are you considering buying a new home or selling your current one? Give us a call to see how we can help! Ruth Stultz is a highly experienced realtor who understands Lake Conroe and Montgomery County better than anyone. When it comes to finding the perfect property with everything you want, Ruth knows exactly where to look. You can trust Ruth Stultz with your next home, or the sale of your current home.
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