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.
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
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.
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.
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
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.
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.
$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.
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!