It’s obvious that buying a home is an expensive endeavor. However, just how expensive, and what makes it so expensive, are two things that often elude the typical first-time home buyer.
Most first-time home buyers find themselves wondering:
1. What are closing costs?
The down payment is only one of several expenses you’ll pay when you secure your home purchase. Closing costs are a series of taxes and fees that are required to make the transaction official. According to Kiplinger, closing costs can add between two and five percent to the cost of your home purchase. Some of the most common closing costs include:
• A loan origination fee
• Prepaid homeowner’s association fees
• Underwriting fees
2. Who pays for the home inspection?
In almost all cases, the buyer pays for the home inspection. Home Buying Institute pointed out that the inspection can only benefit the buyer, so that is who should pay for it. While the seller may have gotten the home appraised or even paid for an inspection, it’s always a good idea for the buyer to pay for another inspection to gain greater insight into the integrity of the home.
Typically, a home inspection costs between $300 and $500.
3. How much will home repairs cost?
Buying a fixer-upper might be an attractively low-cost option, but the savings very well might stop there. Once you move in, improving that home can become a more expensive ordeal than you anticipated. Home renovations have a way of turning up surprise expenses.
Even if you chose a well-built house with no obvious repairs to make, there will still likely be an unanticipated expense that you need to address, like an appliance that wears out or a leaky pipe, LifeHacker pointed out.
4. What is escrow?
An escrow account collects money from the borrower so that the lender can pay certain expenses, like property taxes or homeowner’s insurance premiums. Sometimes, lenders require a payment into an escrow account at the time of closing, and that expense is considered one aspect of closing costs. However, Kiplinger explained that many homeowners will be expected to make a monthly escrow payment in addition to their mortgage payment.
The cost of a home purchase is never just one expense. Often, little things that take people by surprise add up quickly and can easily overwhelm the buyer. Don’t worry though—when you work with the lending experts at The Federal Savings Bank, we’ll make sure you understand your home-buying journey and help you cut the costs associated with it.
By Shaun Meller