Getting a mortgage is a big financial step, and being in the know about all associated costs is crucial for proper budgeting, advises the KRS Holdings Tidewater team. Though most homebuyers are fully aware of the obvious costs-the down payment and monthly mortgage payments-several other hidden costs could blindside you. Understanding these additional costs will put you in an able position to make a decision without straining your budget. This article shall touch base on some of the other less spoken-of costs of the whole mortgage process and show some pointers on how to be prepared for them.
Closing Costs
Arguably, perhaps one of the most powerful and greatest of all the hidden costs of buying a home may be closing costs. In general, these are known to refer to fees taken by the lenders as well as third parties, which are required to be paid in order for the consummation of the purchase of the property to take place. They include but are not limited to loan origination fees, appraisal fees, credit report fees, and title insurance. They usually average between 2% to 5% of the purchase price of the home.
All of these your lender should provide in a complete Good Faith Estimate to avoid any surprises. Sometimes, the seller pays partial closing costs. That, too, should be negotiated in the purchase agreement.
Maintenance and Repairs
It does, but ownership is particularly burdened with a host of maintenance and repair costs that new buyers often overlook. These may range from routine maintenance chores, having to do with the care of one’s lawn, cleaning gutters, servicing HVAC systems, among others, to less predictable ones that may range from anything to fixing a leaky roof to broken appliance replacements.
To that effect, it is always good to have an emergency fund for home maintenance. Experts say a prudent amount to allocate for maintenance and repairs is around 1% of your home value per year. In this regard, you will be better prepared with sufficient financial resources if a problem crops up.
Mortgage Broker Fees
Mortgage brokers may be a very good ally in getting the best possible terms for your mortgage. However, the services have associated costs, and most often a mortgage broker will charge for the services to be paid by the borrower or the lender. This may be an out-and-out fixed dollar amount or a percentage of the loan amount; sometimes it may vary with the broker and the complexity involved in your mortgage needs.
These are the things that really are essential to be discussed and made clear with the broker at the very beginning before making any commitments. Some brokers derive their compensation through lender rebates or commissions. So, ask them how they get paid, and whether it could affect the terms of the mortgage. Also, be sure to weigh the added benefits of using a broker, such as options for more varieties of loan products, personal service, and making sure the cost is well worth the value they will bring to your mortgage process.
Moving Costs
Besides the cost of just the house and mortgage, it may also be quite costly to move in: movers, boxes, other packing supplies, utility transfer fees, and address change fees. It can be really very expensive to move, depending on how much distance one is moving away from and how much stuff he or she is taking. In fact, many have even donated items to charity and/or sold items via garage sale simply because a move was too expensive for the item’s worth.
Conclusion
Knowing and preparing oneself against these hidden costs of buying a house will help assure that transitions into the house go as smoothly as possible. Most of these costs are associated with the time of buying and ownership, including but not limited to closing costs, mortgage insurance, property taxes, homeowner’s insurance, maintenance and repairs, moving cost, and mortgage broker fees.
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