When future first time home buyers start saving up to buy a home, depending upon the type of home loan being pursued, saving up enough for a down payment might take a while. Your loan officer can provide you with a Loan Estimate which will highlight how much money will be needed at the closing table. This amount includes not only down payment funds but an estimate of how much closing costs will be is also provided in the estimate. But there are other costs that come with home buying beyond a down payment and closing fees.
Your Heart
One of the biggest mistakes first time buyers make is letting their hearts take over their minds. Emotions can take a toil on the pocketbook, overpaying for a property against the advice of their real estate agent. Pushing debt ratio limits to finance that “perfect” home can create more than a little stress as the monthly mortgage check is written. Take it easy, breathe, and follow the advice of your agent. And don’t make an offer on the very first home you find.
Easements
An easement is a legal right-of-way for various utility companies to access your property with or without your permission. How can they do that? Let’s say there’s a telephone pole in your backyard and there’s a transformer at the very top. One summer day, it fails, leaving residents in your area without power. The electricity company can walk into your backyard and repair and replace the transformer. Or, a gas line needs repair and it runs right underneath your brand new tool shed you just built. The utility company needs to move it and so they do. But they’re not required to move it back. You put the shed on top of their line, they didn’t.
HVAC
Heating, ventilation and air conditioning systems are mechanical and will eventually wear out. And when they do, your pocketbook will feel the pain. HVAC systems are expensive and when the A/C goes out, you can expect to spend $10,000 or more on a new unit.
Taxes and Insurance
Tax and insurance amounts were disclosed to you on your loan estimate, so you know about what they will be. And if you escrow for property taxes and insurance each month, annual premiums and tax bills are paid. But taxes will go up over time as property values increase. That means more out of pocket than you were planning on. If you don’t plan to escrow, when you get your property tax bill, you’ll wish you had.
When you’re saving up to buy a home, remember there will be future costs along with your mortgage payments. Plan for them by setting aside a little each month for emergency repairs.
