Hidden Costs of Home Ownership

Many people who are considering home ownership for the first time are excited to discover they have saved $10,000 and figure this will allow them to buy a home with five or six percent down. However, the challenge is that your down payment is only the beginning of the financial aspects involved in buying a home. Here are some things you need to consider when saving for your down payment.

• Taxes & Insurance – In many cases, your homeowner’s insurance policy will have to be paid a full year in advance. For taxes, you’ll need to pay the taxes remaining in the quarter between the date of closing and the next quarter in addition to potentially escrowing your first quarter’s taxes.
• Assorted pre-closing costs – Appraisals, home inspections, credit reports, underwriting fees and a whole host of other “small” costs can add up pretty quickly. You want to make sure you have an honest discussion with your mortgage broker about these costs and how much they will cost.
• Costs as closing – Many lenders charge a funding fee, lawyers want to get paid for their work and there are fees to record your mortgage and your property deed.

After your loan approval

Many lenders do not require a home inspection prior to funding a loan. However, buyers should always request a certified inspection for a number of reasons. There are hidden traps that could wind up costing you thousands of dollars in unforeseen repairs after you buy a home. Some common problems include:

• Roofs – Imagine buying the home of your dream and discovering in three or four months you are going to need a new roof. The overall expense can cripple your finances and cause property damage.
• Electric systems – Your electrical system failing can mean a house fire which can have devastating consequences. While most homeowner’s insurance policies will cover losses, you can lose valuable family heirlooms and pay thousands of dollars in temporary housing costs.
• Heating and air – Heating and air conditioning systems that are not well maintained often fail. This leaves a new homeowner with huge expenses trying to get their systems up to par. Home inspections may not sniff out every problem but can identity red flags and let home buyers at least understand the age of their systems.

One of the best things you can do for yourself when purchasing a new home is to have a reserve fund. These funds can be used for unforeseen repairs that seem to always occur with a home. Keep in mind, these costs are not going to be factored into your overall ability to pay your mortgage.

Make sure you are prepared for the hidden costs of home ownership. At Core Mortgage Financial, we’ll make sure that you understand all the fees that will be associated with your loan. We will also try to address any questions or concerns you may have about the overall cost of home ownership.