If you’re planning to buy a new home in the near future, you’re probably working hard to prepare a budget and determine how much you can afford before you start viewing homes. While it’s good to have an idea of what you can pay for a new house, many buyers routinely miss several key home buying costs that can later cause a variety of problems. Before you start looking for your new home, make sure you add these three commonly forgotten costs to your budget.
Title Insurance: Critical Protection Against Title Claims
Title insurance is something that most buyers forget about until closing, but it’s a necessary form of protection for every soon-to-be homeowner. Title insurance provides you with protection against financial losses in the event that you later discover title defects. For example, title insurance can protect you from losses in situations where the seller doesn’t actually own the home, where there is a lien on the property, or where a previous owner accidentally omitted or deliberately falsified critical property records.
In a standard real estate contract the seller will pay for the buyer’s title insurance, but in most states, the buyer is also required to buy title insurance to protect the mortgage lender. Title insurance for lenders usually costs, on average, $2.50 per $1,000 of assessed property value.
Unexpected Renovations: Home Inspectors Aren’t Perfect
Typically, your home inspector will alert you to any issues requiring renovation or repair before you buy your new home. But if your home inspector is negligent and misses a critical problem with the home, you may need to find money for surprise renovations – and fast.
While you can file an insurance claim or sue the inspector for negligence in order to recoup damages, court cases and insurance claims take time – time that you may not have if you’re facing an urgent home problem. Most real estate agents suggest budgeting 1% of your home’s budget each year for maintenance costs.
Initial Interest: Your First Month Comes Due Before You Know It
Your mortgage starts accruing interest on the day you close the home sale, not on the day you move in. So in order to make sure that you have a consistent payment, the lender collects the first partial month of interest at the closing table. It’s called “prepaid interest” and is included in your overall closing costs. That means if you sign the contract on March 15, you’ll need to make an interest payment for the period of time lasting from March 15 to March 31 at closing. Your payment will then come due on May 1 – so be sure to include your first interest payment in planning for your closing costs.
Buying a home isn’t cheap. But when you clearly understand the various costs involved, it’s easier to plan your home purchase and budget for expenses, both expected and not. Contact your local mortgage professional to learn more about home buying costs.
Buying your first home is exciting. Many young people view homeownership as the definitive mark of adulthood, the final milestone on a decades-long journey. And while becoming a homeowner is cause for celebration, you’ll want to ensure you keep your enthusiasm in check just a little while longer.
If you’re shopping for a great mortgage, you’ll want to use a mortgage calculator. Mortgage calculators keep getting more accurate and more complex, allowing you to explore the various details involved in a mortgage. Try one of these mortgage calculators to learn what you can expect.
When it comes to finding the best mortgage, your credit score is a major determinant as to the kinds of rates and conditions you can get. Lenders quite understandably want to manage their risk. But for a number of potential homeowners, these practices and policies can be a barrier to home ownership.
If you’re nearing retirement, you’re likely starting to think about your savings and retirement plan and how you can ensure a financially secure retirement. With your peak income-earning years largely behind you, you’ll need to work with what you have in order to ensure a livable retirement income. That’s where a reverse mortgage may be a sensible option.
If you’re considering whether home ownership is the right decision for you, there are lots of different factors you’ll want to take into account. Do you want to keep moving around, or are you ready to lay down roots in a community? Are you prepared for the additional upkeep that home ownership requires?
When it comes to a mortgage and the financial stability of your home, there’s no such thing as too much you can know in the case of keeping your biggest investment safe. If you’re looking at paying off debt and are considering using the equity in your home, here are a few things you’ll need to know about refinancing your mortgage and home equity lines of credit.
Credit is of considerable concern when it comes to buying a home, but if you’re on the market for a new place in the next few months there may be some timely news that applies to you. If you haven’t heard about the changes to the Federal Housing Administration’s (FHA) credit score minimum, here’s some information on the recent reduction and how it may impact your home purchase.
Buying a home involves a variety of nuances and strange-sounding terms, and one of the least understood aspects of the home buying process is the escrow account. Essentially, an escrow account is a third party bank account your lender can require you to pay into in order to cover certain costs related to your home. Your lender uses an escrow account to ensure that property taxes and home insurance fees get paid on time.
There is so much to know when it comes to home ownership that even wading into all of the information can seem overwhelming, but if there’s one thing you need when the time comes to purchasing a home, it’s to be prepared. Here are a few ways that you can ensure you’re ready for what a mortgage entails so that buying your dream home will be a positive experience you won’t regret.