Purchasing is home is likely going to be the biggest financial investment you will make in your lifetime. Knowing this, many people have to save up for years before they’re able to afford to purchase a home. And even then, they still have to pay a mortgage for about the next 30 or so years. However, people often forget that there are more expenses to buying a home than simply saving for a down payment and then making your monthly mortgage payments. To show you what else you’ll have to pay for when preparing to purchase a home, here are three things that could make buying a home more expensive than you might have thought.
Private Mortgage Insurance
In most situations, a potential homeowner should shoot to have a down payment of about 20 percent of what the home will cost. However, this amount isn’t always necessary or possible for people to pay. When a smaller down payment is given, Glenn Curtis, a contributor to Investopedia.com, writes that you’ll often have to pay a private mortgage insurance premium. This insurance is meant to protect the lender in case you aren’t able to keep your home. If you are required to pay PMI along with your mortgage, Curtis warns that it may not be deductible, it’s hard to get out of, and it can go on longer than you may think. So before you settle for making a smaller down payment, consider whether paying private mortgage insurance is worth it to you.
Before you go through the final process of purchasing a new home, you’re going to want to get a home inspection to make sure you know exactly what you’re paying for. According to Michele Lerner, a contributor to BankRate.com, shares that a home inspection can cost you upwards of $300. And if you have to have additional inspections, like for pests or if you make an offer on multiple houses, you’ll be paying even more. This money will be on top of your down payment and any other costs you’ve already incurred. However, a home inspection isn’t something you’re going to want to skip over because it will inform you if there’s something wrong or suspect about the home you’re considering purchasing. Paying this money now could save you from having to pay a lot more money later if you have to fix a problem with the home.
Once the sale of the new home finally goes through, you’ll then be required to pay closing costs. According to John Schmoll, a contributor to FrugalRules.com, closing costs include things like title fees, insurance, taxes, and more. These can add up to thousands of dollars on top of the actual price of the home. In some cases, you as the buyer can negotiate to have the seller pay for the closing costs. However, this isn’t something that is guaranteed to happen, so plan on paying an extra couple thousand dollars here as well.
If you’re about to start the process of buying a home, use the tips mentioned above to ensure you know exactly what you’ll have to pay for in addition to the physical home you plan to purchase.