For most people, purchasing a home is the largest purchase of their life. There are many benefits of becoming a homeowner, but it’s important to know about hidden costs you may not be aware of. These costs can increase your overall expenses after your purchase, so they’re important factors to consider when looking at different homes, locations, and price ranges.
Fortunately, this guide can provide you with an overview of the hidden costs of buying a home in 2024. With this information, you can make an informed decision about your purchase, stick to your budget, and make sure you won’t be caught off guard by new expenses later.
Closing Costs
Most prospective homeowners have heard of closing costs, but did you know that the home’s purchase price, underwriting, processing fees, and real estate broker fees influence closing costs? Additionally, title insurance and appraisals can also impact your closing expenses. You could be looking at closing costs between 3 and 5% of your home’s purchase price.
Moving Expenses
Have you taken a look at your estimated moving expenses? Moving expenses are a commonly overlooked cost of buying a home, and these expenses can vary significantly based on the movers you choose, the distance you’re moving, and the amount of belongings you have. For example, moving across the country typically costs a lot more than moving somewhere local. Similarly, the more items you own, the larger a moving truck you may need, resulting in additional expenses.
Property Taxes
When working with a real estate agency, you’ll likely learn about the property taxes you’ll need to pay after you become a homeowner. However, it’s important to know that property taxes are not set in stone, and municipal governments can change them.
Projections and history of property tax rates can give you a better idea of the taxes you’ll likely pay in the future. Generally, these taxes are charged as part of your escrow payment.
HOA Fees
Depending on the area you’re moving to, you may have a homeowners association (HOA). These associations often charge a fee to homeowners and, unfortunately, there’s no way to opt out of an HOA in most cases. Additionally, HOAs typically impose rules that are subject to fines, such as keeping your property to specified standards.
Additionally, you may face greater fees if you live in a unit of homes or a co-op. Some of these HOAs even require you to pay for regular home inspections or assessments. Be sure to speak with your real estate agent about HOAs, and learn more about the HOA if a property has one before you sign on the dotted line.
Insurance
Did you know that you’ll likely need insurance after purchasing a home? There are two types of insurance you’ll most likely need to maintain, and it’s important to understand what they are and the costs you can expect to pay.
Homeowner’s Insurance
Most mortgages will require you to maintain a certain level of homeowner’s insurance as part of your loan agreement. If you do not choose an insurer on your own, the bank will likely choose one for you, and it may be more expensive than what you could find elsewhere.
However, it’s always a good idea to have a homeowner’s insurance policy, even after you’ve finished paying your mortgage. Homeowner’s insurance covers the cost of damage to your home and property. The type of coverage you receive and the cost of your plan usually vary by policy.
Homeowner’s insurance is impacted by several factors, including the area you live in, your claims history, the value of your home and property, and any additional risk factors you have, such as swimming pools or trampolines.
Mortgage Insurance
Most homebuyers need to maintain mortgage insurance for at least part of their mortgage. This insurance protects your lender from financial loss if you fail to meet your mortgage payments.
Mortgage insurance payments are generally required if you do not have a 20% down payment. However, some home buying programs waive or reduce the requirement. For example, home loans that are part of veteran benefits do not usually require mortgage insurance.
Once you have paid down at least 20% of your loan, you can usually request the cessation of your mortgage insurance.
School Taxes
You may need to pay school taxes in most areas, even if you don’t have children yourself. However, good school districts are generally associated with higher property values, even if school taxes can be higher in those areas. These expenses may be justified, especially if you have kids and you’re looking for a great school district, but they’re important to be aware of nonetheless.
Potentially Increased Daily Expenses
Depending on where you’re purchasing a home, your mortgage agreement, and other factors, your daily expenses may increase. For example, if you are moving from the city to a rural area, you may find that groceries cost more and you have less choices when buying locally.
If you’re moving into a larger home than the one you lived in before, expect your utilities to rise, especially if you live in an area that has prominent winters or summers. These potential extra expenses should always be calculated into your budget before purchasing a home.
Maintenance
When you become a homeowner, you’ll become responsible for maintaining your property, and it can get costly. This is a significant factor you should consider when looking at properties. Keep in mind which properties may have more upcoming maintenance expenses. For example, you might ask when the last time the roof was done, or if there has been any previous pest infestations. It may be a good idea to hire an inspector and an appraiser before putting an offer on any home.
In addition to larger maintenance expenses, you’ll need to take care of the outside of your property and lawn. For example, you may need to routinely mow your lawn. That means you’ll either need to pay a landscaper to mow your property, or you’ll need to invest in a lawn mower along with its maintenance costs and gasoline expenses.
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