Are you looking into buying a new house? It’s definitely not something that should be taken lightly, especially since this is probably the most money you’ll ever spend in your life. And, many people don’t realize it, but there are many other costs to consider when buying a new house as well!
Related: How Much House Can I Afford?
Buying a New House? Be Wary of Hidden Costs
Buying a new house is a huge commitment. Oftentimes, buyers don’t know the full extent of the purchase that they’re about to get themselves into… And thus, a failure to properly estimate and manage money is what ensues. Being the wise readers that you are, I’m pretty sure a lot of you are aware of this unwritten fact. But, in the spirit of making sure that every reader finds value in what I write, here are some of those hidden expenses that you’ll need to include in your budget:
1) Home Inspection Fees
As with every wise buyer, a home inspection is a must if you want to properly gauge whether the house you’re planning to buy is worth the asking price or not. The home inspector’s report is going to provide you with an estimate of probable repairs — and their costs — that you’re going to need to get done if you plan on buying the house. It’s important to take note that not all home inspectors are thorough, but they at least check most significant aspects of the house.
2) Appraisal Fee
When you’re buying a new house, lenders will often require you to have the property appraised to ensure that you aren’t borrowing more than what you actually need. It costs $150 to $250 to have a property appraised. While this is a paltry amount compared to what the house costs, it’s still a significant amount of money to consider which could otherwise be used for furniture and repairs or upgrades.
3) Legal Fees
Lawyers deal with title searches, title registration, mortgages, and of course, a thorough review of the real estate offer letter (which is incredibly important if you want to close a deal). They also handle a lot of paperwork that is required to come up with accurate adjustment costs. You’re likely to shell out between $1,000 to $2,500 for these services.
4) Property Survey Fee
While not all lenders will require a property survey, it’s still an essential process to undergo. Knowing your property boundaries also ensures that you not only know the right of way in the area, but you are also able to find out if there is any property encroachment happening, either from your end or from the adjacent property. This survey could easily cost you between $500 to $2,000.
5) Home Insurance
There are a wide variety of things that could cost you your home. It’s because of this fact alone that you need to opt for a home insurance policy when buying a new house. For lenders, they will also insist that you opt for home insurance because technically, the house is their only collateral. Lenders will almost always ask you to get an insurance plan that covers the total value of the house.
6) Miscellaneous Essentials
Furniture, appliances, even the moving and storage fees all fall under this category. These vary from person to person, but the fact remains that these are significant enough to consider.
Buying a New House? Watch Your Cash Flow!
As you can see in the listing above, there are many costs associated with buying a new house. You’ll owe money at closing for an appraisal, an inspection, as well as legal fees. Also, if you plan on sticking around a while, you should also look into a property survey. Beyond this, home insurance is a must and things like appliances and furniture…they’re pretty necessary too!
So sure, when buying a new house, you might put $30,000 toward the down-payment, but you might shell out another $5,000+ for all the added costs above! Make sure you’ve got the cash for the extras and don’t be left house poor!
Are you looking into buying a new house? Do you truly have all the funds you need?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.