The True Cost of Buying and Owning a Home
As seen on The Rhode Show
If you are looking to take the leap and find the perfect home for you and your family, one of the most important factors you’ll need to consider is the true cost of buying a home. Home ownership is a long-term commitment with a lot of costs at the start of the process and every month thereafter. It’s important to be aware of these costs so that you are well prepared and avoid any surprises along the way.
Your monthly mortgage payment is undoubtedly the most expected cost of buying a home, but it is only the start. There are several other costs you need to consider and build into your budget.
One of the major considerations to keep in mind when first buying a home are the additional closing costs that come at the end of a real estate transaction. These costs represent the fees you will likely pay to your lender or other third parties. Although closing costs can vary greatly, you’ll want to work with your lender and real-estate agent to prepare for them at the start. The costs can include one-time fees such as…
- Appraisal fee; Survey fee; Wire transfer fee; Credit report fee; etc.
Real estate agent commission
Like closing costs, real estate agent commissions are one-time fees at closing and are often negotiable. Generally, these fees are typically 5-6% of the home’s sale price, split between the buyer’s agent and seller’s agent.
Property taxes can vary town to town. Ask your real estate agent to help you understand the taxes in each of the areas you are looking to purchase. Property taxes can fluctuate year over year, so don’t assume that they’ll stay the same.
Homeowners Insurance: Similar to property taxes, the cost of homeowners insurance varies by location. The cost can also vary by insurance company, so it pays to shop around.
PMI: Private mortgage insurance, also called PMI, is a type of mortgage insurance you might be required to pay for if you have a conventional loan. PMI protects the lender—not you—if you stop making payments on your loan. PMI is arranged by the lender and provided by private insurance companies and is usually required when you have a conventional loan and make a down payment of less than 20 percent of the home’s purchase price. The most common way to pay for PMI is a monthly premium added to your mortgage payment.
If you’re buying a condo or a home in a development with a homeowners association, keep in mind that you will likely have a monthly fee from the development/association on top of your mortgage.
Monthly utilities obviously vary greatly based on the size, location, and build of your home. Ask your real estate agent to provide an estimate of monthly utility costs of potential homes to ensure that you are still within your budget.