Home buyers know that buying a home incurs certain costs—after all home ownership doesn’t come free! However, aside from the down payment and mortgage payment, there are other costs for home buyers to consider before they sign on the dotted line. Read on to learn about some of the hidden costs of buying your first home so you can be prepared when you become a first-time homeowner!
Home Inspections
Once you find the home that is right for you and your offer is accepted, don’t forget that the cost of the various inspections will likely fall to you. Home buyers are strongly encouraged to get a home inspection done by a trusted inspection professional to find out if there are any issues with the house before you go any further in the process. Aside from a home inspection, you may also opt to get other, more specialized types of inspections such as:
- Termite and pest inspections
- Electrical and plumbing inspections
- HVAC inspections
- Well, sewer or septic tank inspections
- Asbestos and mold inspections
- And many others
While the potential benefits of these inspections may far outweigh the costs, it is important to keep in mind that you as the buyer will foot the bills for them unless they are negotiated into your purchase offer.
Closing Expenses
Most buyers know that they will have to pay closing costs when they finally close on their home, but many don’t understand just what those closing costs include. Aside from your down payment for the home, other items you may need to pay for at closing include:
- Origination and appraisal fees
- Documentation fees
- Discount points
- Title searches and title insurance
- Credit report charges and deed-recording fees
- Prepaid items like interim interest, homeowner’s insurance and tax and insurance escrow
- And many others
When you buy your home, you may be able to negotiate some of these fees or even negotiate for the seller to pay some or all of them. Talk to your lender and real estate agent about what costs you will incur and your options to pay for them. Luckily, the law requires that buyers be provided with a Loan Estimate and Closing Disclosure statement that will tell you what your closing costs will be prior to closing.
HOA Fees
Many homes in North Carolina are part of a homeowners’ association, or HOA—especially if the home is a townhome or a condominium. However, many buyers forget to include this cost in their home buying budget. Before you buy your home, as your real estate agent to go over the homeowners association dues and bylaws with you to help you decide not only if you can afford the annual costs of membership, but if the HOA rules fit with your lifestyle. Costs of HOA dues vary widely, so make sure you understand your cost commitment before you agree to make a home your own.
Home Maintenance
When you become a homeowner, you become responsible for home maintenance tasks that you may not have been responsible for as a renter. This means that the time and financial costs of home maintenance now fall to you. Consider items like yard maintenance, cleaning services and routine maintenance, but also keep in mind that as a homeowner you will now be on the hook for any large repairs like roof replacements, water damage and more. Make sure you are ready for the ongoing costs of home maintenance before you commit to buying your first home.
Property Taxes
Owning a home means you own property—and property ownership comes with property taxes! Your property taxes are due annually and assessed based on the value of your home. In some cases, your lender will collect your property taxes from you throughout the year as a part of your mortgage payment, and then pay the taxes on your behalf. In other cases, you will be responsible for payment yourself. Before you close on your first home, make sure you understand the requirements of your lender and get an idea of what your property taxes might be. Keep in mind though that your property taxes will change over time.
Buying your first home can be complicated, but understanding the hidden costs might make it just a little bit easier. The NC Housing Finance Agency offers many resources for first-time buyers including infographics, calculators and affordable mortgage options that may help make buying your first home more understandable and more affordable. Access these resources and learn more about home ownership at www.nchfa.com/home-buyers.
