Now is one of the best times to purchase a new home with the average value going up by 25 percent in the last 3 years alone. With more people scrambling to pick up their own dream home, it is important for every first-time buyer to understand what costs they can expect in the coming months and years outside of the initial down payment and mortgage.
In This Post:
Private Mortgage Insurance
Most new buyers are not going to put more than 20 percent of their home's value as a down payment, and this means that many will be required to acquire private mortgage insurance before a loan is approved. These policies are designed to protect the lender and the buyer in the event that they default on their loan. When 20 percent equity has been reached, these insurance policies can often be discontinued.
Unlike mortgage insurance that may not be needed for some buyers, homeowners insurance is vital for everyone who owns a home. These policies are designed to cover some or all of the expenses if the home is vandalized, property is stolen, or common accidents such as a fire occur. In order to keep premiums low, owners should consider affordable upgrades such as home security systems that could bring monthly costs and deductibles down. To get a sense of what security companies have to offer, check out NorthStar Alarm company reviews and those of similar providers.
When a home is purchased or gifted to an individual, they will be required to pay property tax when the title is handed over. The property tax is determined by the value of the home and the percentage is set by the local government to pay for expenses such as schools and roadways. In the majority of states, property tax is reassessed and paid every five-to-seven years along with every time that the property is sold.
Maintenance and Utilities
These are two other areas in which homeowners will pay dramatically different amounts depending on a number of variables. Before purchasing a home, it is best to speak with the current or past resident about what can be expected for utilities such as electricity, gas, and water. Some of the maintenance costs may include replacing sump pumps every few years, installing new roofing, changing filters monthly, or the upkeep of additions such as pools. The cost of leasing other upgrades such as solar panels or a private well will also be passed on to the new owner.
The Closing Process
Know what you are getting into before you close on your home. You will need a number of people there, including you and your seller’s lawyers (if either of you have hired one), your home builder and your lender’s representatives, real estate professionals for both sides, a closing agent, and a notary public. During the meeting between all these individuals, you will sign your loan documents, including an HUD-1 Settlement Statement, a mortgage or deed of trust, and a promissory note.