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What Other Costs Are Associated With Buying A Home?

costs associated with buying a homeBuying your own home can be one of the most exciting and rewarding experiences in a person’s life. If you’re prepared for the additional costs associated with purchasing a home, then you will be one step ahead of the game and will probably have a much better home buying experience. Here’s a quick overview of other expenses that you can expect to see throughout the process. 

Closing Costs

Closing costs are considered the additional fees and premiums associated with obtaining a loan and closing on a property. These can vary depending on which lender you use, so it’s always a good idea to get a couple different quotes and have your realtor help you analyze them. Usually closing costs will be somewhere in the range of 2.5 – 3% of the total amount that the home loan is for. Below is a list of the most common closing costs:

      • Loan origination fee
      • Loan discount (points)
      • Application Fee
      • Appraisal Fee
      • Credit Report Fee
      • Lender’s Inspection Fee
      • Mortgage Insurance Application Fee
      • Title Attorney Fee
      • Interest
      • Mortgage Insurance Premium
      • Hazard Insurance Premium
      • Flood Insurance Premium
      • Homeowners Insurance
      • City Property Taxes
      • County Property Taxes
      • Annual Assessments
      • Title Search
      • Title Insurance Fees
      • Doc Preparation Fee
      • Notary Fee
      • Recording Fees
      • Transfer Tax

Down Payment

The amount you need to put down for down payment is going to vary depending on the loan that you are using. Veterans using the VA loan are eligible to get 100% financing, which means that they don’t have to put any money down when purchasing a home. FHA Loans, which are most commonly used by first time home buyers, requires a minimum of 3.5% down. So on a $200,000 loan, you would need a down payment of $7,000. More conventional loans have a minimum of a 5% downpayment. If this seems a bit out reach for you financially, fret not……there are down payment assistance programs that you may qualify for. Don’t let the downpayment scare or prevent you from buying your first home.

Home Inspection

Home inspections are one of the most important things you can do to protect yourself when purchasing a home, yet deciding not to do one is often one of the biggest mistakes first-time home buyers make. The cost for an inspection usually runs somewhere in the neighborhood of $300-$500 depending on where you live and what company you choose. These are comprehensive inspections of the home that look for any hidden defects or sometimes obvious issues. There are other more specific inspections you could order as well, such as testing for mold or radon.

Earnest Money

Earnest money is exactly what it sounds like. It is used to show homeowners that you are “earnest” or serious about buying their home. Otherwise you could easily just go put offers on multiple houses at once. This makes sure the buyer has some skin in the game and can’t walk away for just any reason. The amount of earnest money can vary greatly with each deal, but in Tennessee it is generally accepted that 1% of the sales price is a fair amount of earnest money. 

Homeowners Insurance

Homeowner’s insurance is usually required if you are obtaining a loan. This insurance not only protects the home itself from a variety of disasters, but also your personal belongings that go along with the property. Costs can vary greatly, but a good rule of thumb to give you an idea would be to divide the value of a home by 1,000 then multiply that result by $3.50. So for example if you were purchasing a home for $200,000 a good estimate for homeowners insurance on this home would be $700/year or about $58/month. This amount is usually tied into your monthly mortgage payment.

Moving Day

Make sure you take into consideration how much it will cost to hire movers…… or you could always enlist your friends and family to help! If you’re moving out of state and bringing everything with you, you can expect much higher moving expenses.

Changing Utilities

It’s a good idea to call all of your service providers before your move so that you have a good idea of how much it will cost to connect your services. These include your cable, phone, alarm, internet, water & sewage, etc.