Other Costs to Consider When Buying a Home

When it's your first time venturing into the home buying process, there's a lot to learn. While you're probably aware of the need to save for a down payment, there may be other costs you haven't considered. Let's dive into those other costs to ensure you are financially prepared for buying a home.

Home Inspection

When you've found your dream home, one of the next steps you'll want to take is to work with your agent to schedule a home inspection. The home inspection provides a deeper analysis into the condition of the home, and is of great benefit to you as the buyer. This inspection can cost as much as $500, so planning ahead can help alleviate any sticker shock.

Closing Costs

Closing costs can vary based on the city where you are purchasing, the home itself, and your loan type. According to Zillow.com, home buyers will pay between 2-5 percent of the purchase price of their home in closing fees. On average, though, buyers pay roughly $3,700 in closing fees. It's important to keep in mind that closing costs can be negotiated with the seller, however it's still wise to build these costs into your saving plan for purchasing a home.

Repairs + Updates

Remember that handy home inspection you received? It may reveal major or minor repairs and updates to your potential home. Plan to save some extra dollars to fix these problem areas. Plus, you may have your own personal renovation plans, so having money to do so should be prioritized.

Mortgage Insurance

Mortgage insurance is required when there is less than a required 20 percent down payment. Mortgage insurance should not be confused with homeowners or flood insurance policies. Plus, there are different mortgage insurances depending on your mortgage type; the most common is for conventional loans and is called Private Mortgage Insurance (PMI). According to Bankrate.com, PMI fees, for example, vary from around 0.3 percent to about 1.5 percent of the original loan amount per year, depending on the size of the down payment and the borrower's credit score.

Homeowner's Insurance

Finally, don't forget to factor in the costs of homeowner's insurance into your budget. As you know, homeowner's insurance covers losses to your home and possessions inside your home due to storms, fire, theft, and other events. According to Zillow.com, homeowners should expect to pay about $35 per month for every $100,000, of home value, though it depends on your city and state.

Insurance products are not insured by the FDIC, are not deposits, and may lose value.