You’ve used the quick mortgage calculator on your favorite home search website, so you have an idea of what you can afford. Maybe you’ve already got your pre-approval letter from Lake Region Bank. Your monthly mortgage payment is definitely a big financial consideration when buying a home. But it’s not the only expense of homeownership or the home buying process.
Let’s take a closer look at the costs of buying a home so you can build a more realistic home buying budget.
1. Closing Costs
You’ve likely heard about closing costs. But do you know what to expect when closing costs come due when you pass papers?
Closing costs are in addition to your down payment. They are typically 2 to 5 percent of your new home’s purchase price. They include loan origination fees, title insurance, and appraisal fees. They may also include attorney’s fees and property taxes and your first homeowners insurance payment.
At Lake Region Bank, we love to walk the homebuyer through the closing costs and explain what they are. Get in touch with us early in the process to understand the specific closing costs you may be on the hook for (and which ones it is possible for the seller to cover).
2. Moving Expenses
Even if you’ve got an army of friends and family helping you move, you’re going to be paying at least pizza and beer money for moving your stuff from your current home to your new one. If you’re paying for a truck or a pod, don’t forget to include these extra costs in your budget, too:
- Packing supplies
- Utility deposits and service transfer fees
- Temporary lodging, if needed
- Cleaning services for your old or new home
Whether you’re hiring professional movers or renting a truck and doing it yourself, don’t let these extra costs surprise you during the moving process.
3. Repairs and Maintenance
If you’ve been renting, you’re used to calling up your landlord to fix leaky pipes, tune up your furnace, and even replace your worn-out carpet. Now that you own your own home, you’re on the hook for all of these expenses.
Chances are that even if your new home is move-in ready, you’ll want or need to make some updates or repairs once you arrive. These could be painting and cosmetic updates, new appliances, plumbing or electrical fixes, or investing in new lawn equipment or landscaping.
Put all of these expenses in your home buying budget. Don’t forget to add a line for saving up for routine maintenance your home may require in the first year. We recommend estimating approximately 1 to 3 percent of your home’s value to cover these annual costs.
4. Homeowners Association (HOA) Fees
If your new home is in a planned community or condo development, you may be required to pay HOA fees. These fees can range from a couple hundred dollars per month to $1000 and up. Your Realtor can help you understand any potential HOA fees you’ll be responsible for during your home search. If you purchase a home with an HOA, be sure to include these payments in your buying budget.
5. Property Taxes, Insurance, and PMI
Your property taxes, insurance payment, and private mortgage insurance (PMI) will likely be rolled into your monthly mortgage payment. While you won’t need to worry about paying these bills separately each month, their costs can increase over time. Be sure to include wiggle room in your budget to accommodate this.
6. Utility Bills and New Services
If you’re moving into a bigger place, watch out: your utility bills might be higher than you’re paying now. Depending on your provider, you may need to pay transfer fees to transfer your internet/cable, garbage collection, and water and sewer bills to a new address (or set up new accounts in your new city).
To avoid financial surprises as a new homeowner, build a comprehensive home buying budget that includes all of the extra costs we shared above. We can help you understand what your closing and post-closing costs might be. With a list of monthly home expenses beyond your mortgage payment, you’ll know what you need to save to pay for the unexpected when it arises.
Ready to build your home buying budget but not sure where to start? Get in touch with our home lending team! We’d be happy to walk you through the numbers and help you build a personalized budget for your house hunt. Reach out to us today.
