Crunching the numbers is the first order of business when you're preparing to buy a home. There's no use falling in love with a house before you know if you can afford to make it your home sweet home. Save yourself the heartbreak by setting your budget ahead of time, taking care to account for all of the costs beyond the listing price.
Here are the major expenses to consider when it's time to make a home purchase:
The mortgage payments
Thankfully, you don't have to pay the full price of the house in one go - unless you're able to buy with cash. You'll submit a down payment to secure your purchase, generally about 5 to 20 percent of the asking price. The rest is paid through monthly mortgage payments to your lender, which will vary depending on the home's value and the size of your down payment.
The closing costs
These fees are paid at the close of the transaction - when it's time to transfer the title of the property to you. These one-time costs vary by location, property and loan type, but may include fees for the following:
- Credit report
- Document preparation
- Home inspection
- Loan origination
- Money transfer
- Mortgage discount points
- Title insurance
Zillow notes that these fees are generally about 2 to 5 percent of the purchase price.
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The property taxes
As a homeowner, you'll be responsible for paying property taxes based on your area's regulations. NerdWallet reminds homebuyers that these costs won't always be the same, as local governments have the authority to raise property taxes. Increases in the home's value can also cause a bump in these taxes.
Don't forget about a homeowner’s insurance policy, which protects your home from damaged caused by severe weather and other hazards. NerdWallet estimates that these insurance bills range from $500 to $2,000 each year. If you don't pay a 20 percent down payment, you may also need to purchase private mortgage insurance to get loan approval, depending on your lender's requirements.
The home warranty
While it's not a required purchase, a home warranty plan is a smart investment to prepare for unexpected system and appliance breakdowns or replacements. The coverage and price will vary by plan, but they generally cost a few hundred dollars a year.
Once you've signed on the dotted line, it's time to pack your bags and figure out how to get all of your belongings to the new house. Hence the need to factor moving costs into your budget.
The immediate post-move purchases
After making your way down your move-in checklist, you're finally ready for the big moving day. Unfortunately, homeowner expenses don’t typically end once you've moved into your home. You'll want to budget for utilities, homeowner’s association or condo fees and the costs associated with fulfilling your HGTV-worthy design dreams. What's more, Realtor.com estimates that regular maintenance costs typically add up to about 1 percent of your home's value each year - and that's without unexpected repair bills. This is where your home warranty will come in handy.
Being prepared for home repairs is always a good strategy. See how plans from HomeServe can help with the costs of covered repairs.