The True Cost of Buying a Home
Do buyers really understand the costs involved in buying a home? Reflecting on my own home-buying experience, and thinking about the experience that I’ve had with a recent buyer in getting them the house that they want, has turned on a light bulb of sorts in my head. There are sooo many costs involved with buying a home that most people aren’t aware of when they first start on their home-buying journey.
The problem isn’t that Realtors don’t explain the costs. We actually do, but it is the way in which we do it that causes the most confusion for most buyers. Or maybe it’s just my relative lack of experience that’s surfacing? I am not so sure which one it is, but I do know that a detailed explanation should be provided in writing of the true cost of buying a home.
There are five different items which you will need to have money up-front for. In the order which you will need cash on hand for those items, they are:
1. Down Payment
3. Home Insurance
4. Home Inspection
5. Closing Costs: which include
a. Attorney’s Fees for title search and insurance, and representation
b. Prorated taxes already paid by the seller
c. Other prepaid items, such as oil/gas
Each of those items will vary, depending on the type of home you are purchasing, and other variables. Such as the type of financing you are using. Conventional, FHA, VA, and USDA all have different requirements for down payment amounts. Appraisals usually run anywhere from $200 to $500, depending on the area and type of property being appraised. Same thing applies when it comes to home insurance. Seller concessions may reduce the total amount of closing costs that you will have to pay, dependent on the terms that your realtor negotiates in the contract to purchase.
As a buyer, you should have this discussion with your realtor at the beginning of the home buying process. Doing so will allow you to prepare, or be prepared, for all of the nuances of buying a home, and will help to eliminate any last minute surprises and help you to achieve your goal of owning a home with much less stress.