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The Costs of Buying a House

Posted by Brad Pauly on Thursday, December 3rd, 2015 at 3:11pm.

hands holding paper house

 

Besides the final purchase price of your new house, you'll have to consider the costs associated with setting up and moving in. Buying a house with a realty company includes such expenses as:

Some of these expenses can be added to your mortgage or negotiated out of the purchase price of the house you are buying. Others must be paid cash before closing on your home.

 

Deposit

About $1000

The deposit is the first expense you'll encounter once you're ready to make an offer to purchase a house. After you have viewed and chosen a property that you love, you'll want to take it off of the market. To show your commitment to the property and lock yourself in as a buyer, you have to make a deposit. The amount of the deposit will depend on:

  • Where you're planning to live
  • How much your home costs
  • Your credit
  • Your income

Deposits will be held as collateral for keeping your desired house away from other potential homebuyers. As you begin to close on a house, the deposit will be deducted from the final price of the home.

 

Down Payment

5% to 20% of the home's value

Making a down payment will be the largest cash cost you'll encounter. The larger your down payment the better - you'll have to borrow less if you pay more up front. Make sure you balance the amount you spend on your down payment and the amount you save. You'll need up-front cash to pay for things like closing costs. Down payments are a minimum of 5% of the purchase price of your desired home.

 

Mortgage Insurance

0.5% to 1% of the home's value annually

Mortgage insurance is a prerequisite for home buyers who make a down payment of less than 20% of the home's purchase price. You as the buyer of the house will pay for the insurance, but it actually covers your lender in the event that you fail to pay your mortgage. Homes are costly and lenders take a large risk when handing mortgages to homebuyers. The insurance gives them a better incentive to take a risk on those buying a house who don't have a lot of capital. The premium for this insurance is determined by the amount of your down payment. The premium lowers at 10% and 15% down payments. At 20%, the insurance is no longer needed. Self-employed buyers who take on a mortgage must pay a higher premium since the lender's risk increases.

 

Real Estate Transfer Tax

0% to 4% of the value of the house

These are small taxes that your state accepts when a title for land is moved from one homeowner to another. The tax varies from state to state. The final price of the house you are buying will determine the transfer tax rate.

 

Home Appraisal and Inspection

Appraisal: $300 to $400 - Inspection: $250 to $500

Lenders require an appraisal by a licensed expert to determine the value of the home you are buying. The appraisal protects both you and the lender. A documented value of the home provided by an appraiser prevents you from borrowing more money than you need to buy the home while lowering the risk that the lender has to undertake. Some lenders also require a home inspection. A licensed inspector will find faults in the structure and foundation of the home. They will reveal problems with plumbing and electricity that affect the value of the house. Knowing what issues you will face once you have bought your house helps you and your lender understand the extent of your move-in expenses. Essential repairs can be subtracted from the purchase price or fixed before closing at the expense of the current homeowner. Your inspection will vary in cost depending on:

  • How old the house is
  • How large or small it is
  • What condition the property is in

 

Homeowner's Insurance

About $135 a month

You'll need to buy homeowner's insurance before closing on your property. Mortgage lenders require people buying a house to insure their properties. Having insurance reduces the risk of losing the home and mortgage payments for the lender.

 

Legal Fees

Around $800

Housing transactions include large amounts of paperwork. Having a lawyer on hand to help you sort through documents you will be signing keeps you protected in the event that the current homeowners have tried to hide important details detrimental to home ownership. They also ensure that your realty company is helping, not hurting, your purchase power. All legal fees must be paid before you close on your house.

 

Moving Expenses

$2000 to $5000

You'll need to either bring your household items to your new home or buy new ones, both of which entail a considerable expense. Whether you ship or pack and drive your items yourself, you'll encounter expenses such as gasoline, food, lodging, and rental fees. Toiletries, groceries, and last-minute fixes can also add up. Prepare for moving expenses that may surprise you by budgeting extra money after closing.

 

Utilities Connections

About $300

Once you're moved into your new house, you'll need to contact the city to set up your water, gas, and electricity. Don't forget modern conveniences like phone and internet as well. These expenses may be small, but some come with deposits that can hurt your wallet. The expenses may seem overwhelming, but the satisfaction of owning a house is worth the time and monetary investment.

 

Pauly Presley Realty makes it easy to find and buy your dream house. We'll stay by your side through the entire home buying process. Call today to buy a house in Austin, TX!

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