The Unexpected Expenses You’ll Face When Buying a Home
The home purchase expenses you may not know about
Word to the wise: You’ll need more than just the down payment
You’re ready to save for the down payment on a new home. Also consider saving for some less well-known home purchase expenses that will be due at closing. These costs can vary by state and by factors specific to your home purchase. In all, they can total between 2% and 5%1 of the purchase price. Many are negotiable.2 Some are routinely rolled into your monthly mortgage payment.3
It may seem appealing to roll all your closing costs into the mortgage. But if you do, you’ll be paying interest on those fees for the life of the loan.4
The monthly mortgage payment is the total of your Principle, Interest, Taxes, and Insurance and is often shortened into the acronym PITI. Understanding PITI and how much home you can afford is a great place to start, but upfront costs can often be a surprise for first time home buyers. While these initial expenses do not mean you have to choose to buy a house or save for retirement, it is important to know what these fees are.
So as you save for your new home, consider setting money aside for these frequently overlooked expenses:
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1 Zillow, What Are Closing Costs and How Much Are They? Feb. 2020.
2 Federal Deposit Insurance Corporation, Looking for the Best Mortgage, Feb. 2020.
3 Consumer Finance Protection Bureau, What Is an Escrow or Impound Account? Feb. 2020.
4 Consumer Finance Protection Bureau, What Fees or Charges Are Paid When Closing on a Mortgage and Who Pays Them? Feb. 2020.
5 Consumer Finance Protection Bureau, How Much Does It Cost to Receive a Loan Estimate? Feb. 2020.
6 HomeAdvisor, How Much Does a Home Inspection Cost? Feb. 2020.
7 Kearns, Deborah and Barbara Marquand, Closing Costs, Mortgage Fees Explained, Feb. 2020.
8 Ibid, Feb. 2020.
9 ValuePenguin, Average Cost of Title Insurance, 2019.
10 ValuePenguin, Average Closing Costs for a Mortgage in 2019.
11 Zillow, How Closing Works and How Much You'll Pay, Feb. 2020.
12 Kearns, Deborah and Barbara Marquand, Closing Costs, Mortgage Fees Explained, Feb. 2020.
13 ValuePenguin, Average Cost of Homeowners Insurance (2019).
14 Moving.com, Moving Cost Calculator for Moving Estimates, Feb. 2020.
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