So, you’ve found the home of your dreams. You’re finally ready to stop renting and start building toward your future. And after crunching the numbers, you determine that the monthly mortgage payments fall within your affordable range. However – before you go signing on the dotted line – there are a number of hidden expenses that many first-time homebuyers tend to overlook:
1. Home Inspection
It’s always a wise decision to have your home inspected prior to purchasing it. After all, this is likely the largest investment of your life. Paying a professional several hundred dollars to assess the property may save you from a hundred-thousand-dollar disaster down the road.
An important part of the process in obtaining a home mortgage is to have the property appraised by a professional. Residential real estate appraisals typically cost around $350 to $400.
3. Closing Costs
Unless you’ve mastered the art of negotiating and have talked the seller into paying for your closing costs, you’re going to have to come to the closing table with some cash. Typical closing costs can be anywhere from 2% to 4% of the mortgage loan amount.
4. Property Taxes and Homeowners Insurance
The mortgage company will want to ensure that the home is insured and that the property taxes are being paid. So unless you plan on putting more than 20% down, your lender will likely require you to have your taxes and insurance escrowed, which will significantly add to the monthly mortgage payment.
5. Moving Expenses
Another cost to consider is the transportation of your belongings. Depending on the amount of stuff you have, the distance traveled, and the level of help needed, such expenses can run you anywhere from a couple bucks to several thousand dollars.
6. Snow Removal
In the great state Minnesota, we all know how unpredictable Mother Nature can be. Waking up to a foot of snow in your driveway is never a pleasant way to start the day. However, you still have to get to work. So unless you’ve got a shovel and a really strong back, you’ll either have to purchase a snow blower clear it yourself, or pay someone else to do it.
7. Lawn Care
Unless your home is part of an association, another cost to consider is lawn care. Whether you’re a DIY’er or you prefer to pay someone else to do your dirty work, it’s your responsibility to ensure your property is maintained (mowing the lawn, raking leaves, cleaning gutters, trimming trees, etc.).
8. HOA and Condo fees
If you purchase a home that’s part of a Homeowners Association, you won’t be saddled with snow removal or lawn care. However, the conveniences that come with living in a HOA development usually come at a pretty hefty price. You’re likely to spend another two-hundred dollars or more each month for these luxuries as part of your HOA dues.
If you’re purchasing a new-construction home, you likely won’t have a lot to worry about initially. But if the home is somewhat older, it’s always a good idea to set aside a cash reserve for maintenance and repairs, such as replacing an old appliance or repairing the furnace. These types of emergencies usually seem to happen at the most inopportune times. So, having a plan in place can save you from major headaches down the road.
Depending on where you live now, your monthly utility bills will likely be much higher when you move into your own home. You may also have to account for additional bills, such as City water and sewer, as well as garbage/trash collection.