Buying a home is an exciting milestone, but it’s not without its financial surprises. While the down payment and monthly mortgage payments are the most talked about, several hidden costs can catch you off guard. Let’s uncover these expenses, so you can budget wisely and avoid unpleasant surprises.
1. Home Inspection Fees
Before you finalize your purchase, a home inspection is a must. This thorough checkup can reveal potential issues with the property, from structural problems to pest infestations. While the average home inspection costs around $300-$500, it's a small price to pay for peace of mind and negotiating power. Note: For larger homes or for buyers that opt to have multiple add-on services for the inspection, the cost could go up to $1,000 or more. You can research Jackie's Preferred Home Inspectors through this link and view their pricing on their websites.
2. Closing Costs
Closing costs can add up to 2-5% of the home's purchase price. These include fees for loan origination, title insurance, escrow, and attorney services. Be sure to ask your lender for a detailed estimate of these costs early in the process, so you’re not blindsided at the closing table.
3. Property Taxes
Property taxes vary widely depending on your home's location. In Texas, for instance, the average effective property tax rate is about 1.81%. The average property tax rate in Austin, Texas typically ranges between 1.4% and 3.4% of a home's assessed value. These taxes can significantly impact your monthly budget, so it's crucial to factor them in when calculating your home affordability. At closing, you'll also see a number of tax items included in your closing costs such as prorated taxes and pre-paid taxes.
4. Homeowner's Insurance
Protecting your investment with homeowner's insurance is a must. The average annual premium in Texas is around $1,945, but this can vary based on your home's size, location, and the coverage you choose. Shop around and compare quotes to ensure you’re getting the best deal. Pro Tip: You usually get the best deal when you use an insurance broker to find you a plan AND you bundle your home, car, and other insurance policies into one plan. If you are a loyal customer to a particular insurance company, you can also try seeing if they will cut you a deal for being a loyal customer.
5. Private Mortgage Insurance (PMI)
If your down payment is less than 20%, you’ll likely need to pay for PMI. This insurance protects the lender in case you default on your loan. PMI can cost between 0.3% and 1.5% of the original loan amount per year. Once you build up enough equity, you can request to cancel PMI. Ask your lender to explain this topic in more detail if you have questions.
6. Utilities and Maintenance
Your new home comes with ongoing expenses like utilities and maintenance. These costs can add up quickly, especially if you're moving from a smaller space or a rental where some utilities were included. Budget for electricity, water, gas, and regular maintenance tasks like lawn care, HVAC servicing, and minor repairs. For utilities in the Austin, TX area, the averages in 2024 are around:
Electricity: $159
Water: $40 - $60
Natural Gas: $20 - $30
Internet and Cable: $100 - $150
Trash and Recycling: $20 - $30
Phone: $50 - $100
Total: $389 - $529 per month
7. Homeowners Association (HOA) Fees
If you're buying a home in a community with a HOA, you'll need to budget for monthly or annual dues. HOA fees can range from $200 to $600 per month, covering services like landscaping, community amenities, and security. Make sure you understand what’s included and what additional expenses you might incur.
8. Moving Costs
Don't forget to factor in the cost of moving itself. Whether you hire professional movers or rent a truck and do it yourself, moving expenses can range from a few hundred to several thousand dollars, depending on the distance and the amount of stuff you have.
9. Furniture and Appliances
Your new home might need some new furnishings or appliances, especially if you're upgrading in size. Create a budget for these items and prioritize your purchases to avoid overspending right after buying your home. Pro Tip: Facebook marketplace is a great resource for finding discounted furnishings and appliances.
10. Emergency Fund
Last but not least, always have an emergency fund. Unexpected repairs or replacements can pop up at any time. Having a financial cushion will help you handle these surprises without stress.
By being aware of these hidden expenses, you can better prepare for your homebuying journey and avoid financial pitfalls. Remember, the key to a smooth homebuying experience is thorough planning and budgeting.
Looking Ahead: Once you've settled into your new home, there are still hidden expenses to consider. Check out our next blog, "The Hidden Expenses Every Homeowner Should Know," for more tips on managing the costs of homeownership. Happy house hunting! 🏡
Ready to take the next step in your homebuying journey? Contact us today to schedule your consultation and let’s make your dream home a reality!
Comments