5 Extra Expenses First-Time Home Buyers Need to Know About
Buying your first home is no doubt one of the most exciting experiences of your life. You spend years imaging owning a home of your own. You begin to envision how great your life will be in it, all the memories you’ll make, and you can’t wait to sign your ‘X’ on the dotted line.
You know that there will be expenses when you buy a home, but many people forget about them when they decide to turn their dreams into reality.
One of the BEST tips for buying your first home in Southwest Florida is: understanding what all the expenses are when purchasing so you can be prepared for the expenses and how this purchase will impact your overall financial health.
It’s crucial you don’t let the excitement of home buying to cloud your sensibilities. You have to keep in mind that there will be some first-time home buyer expenses you weren’t prepared for or didn’t think about. That is why it is important to take these expenses into consideration right from the start. We’ve listed a few below. Remember that each buying situation is unique and not all of these expenses will apply to you. Make sure to talk with your real estate specialist for details.
Mortgage and Homeowners Insurance
Buying a home is one (if not the largest) purchase you will make in your lifetime so you’re going to want to protect this investment. That’s where homeowners insurance comes in. Most mortgages can’t happen without you getting homeowners insurance. This insurance protects your home from a variety of situations (fire, burglary, natural disasters, etc.) and have different options, depending on the policy.
If you can’t put down at least 20% for a down payment, most mortgages also require you to have mortgage insurance. This protects the bank funding your loan in case you can’t make your mortgage payments.
The good news is that usually, these insurance premiums can be added to your mortgage payment so you can just make one payment to cover it all. This means that your mortgage payment is going to be higher that you originally thought.
Property Taxes
Something you don’t pay when you are renting is property taxes. Once you buy a home, you must start paying property tax. This is a non-negotiable annual fee and is disclosed on the home listing (or public records) so you know how much you will have to pay – usually 1 – 2% of your home’s value. You can opt to pay this monthly (included in your mortgage payment) or one lump payment annually. Either way, you need to be prepared for this yearly expense.
Down Payment
It’s pretty rare (near impossible) to buy a home without a down payment these days (thanks, Housing Crash of 2008). You have to prove to lenders that you are financially responsible and can afford your monthly payments and having a substantial down payment is a great way to do that. For some loans (like an FHA, you might be able to get away with just 3.5% down) but most conventional mortgages will want to see 5-20% down. The more you have down, the better.
Interior, Appliances & Furniture
This might seem like a no-brainer but trust us, we’ve worked with a lot of Buyers over the years. You might like the paint, floors, & appliances that come with the house, but eventually, you will want to make it “your own” with the styles you like. You may need to fill space in your new home and will need to buy new furnishings.
You’ll need curtains (and window treatments can get pricey when you’re putting them in 6 different rooms) and maybe even new household items like dishes, cleaning essentials, tools, maintenance equipment, etc. So, keep this in mind when buying your new home!
Closing Costs
Last but certainly not least: Closing Costs. Don’t feel overwhelmed yet – there’s still closing costs to consider! Closing fees cover everything from preparation fees to attorney’s fees and other charges that may seem random but really do have purpose.
Unless you negotiate with the Seller to pay the fees (most will want the Buyer to pay the fees), plan to pay an extra 3-4% of your home’s value to be paid at closing.
As we’ve discussed here, there are some extra expenses you may have not thought about as a first-time home buyer. It is critical that you go into your home buying adventure feeling confident you have the financial means to own your own home. Talk to us today – we can help you buy your first home in SW Florida!
