Don’t Forget These Costs When Buying A Home

You’ve crunched the mortgage calculators, estimated your tax payments, and taken a realistic look at how much house you can afford. You’ve stuck within your range when scouring the realtor.com® listings, being careful not to bust your budget.

But there are more expenses involved in home buying than just the property costs. And those additional payments, if you don’t factor them in, can be high enough to derail your conscientious planning.

Here’s what to keep in mind:

Buying Costs

You’ve got your mortgage pre-approved, but that’s not all you will need to fork over to get the keys to your new place. Services that need paying:

  • Your buyer’s agent fee
  • An appraisal to confirm a reasonable market price for the property
  • Inspections of structural, mechanical, pest or other potential issues
  • A real estate attorney to review all contracts (depending on the state)

Property taxes vary widely, up to 4.2% of a home’s value in some states, according to a CNN map published in 2013. Depending on when you buy, you may owe the previous owners for property taxes they have already paid. You may also need to pay fees to a local association, such as a condo homeowner’s association.

Moving Costs

Moving into a home can involve major expenses for packing, storing and transporting your possessions and yourself. If you are moving across the country, the costs could be significant. Even moving across town can cost more than you planned for truck rental, movers and equipment.

Utilities

Setting up your telephone, electricity, gas and water—did you budget for these expenses? They could cost more at your new place, especially if you’re moving to a larger home or from a rental.

New Stuff

You may need to purchase appliances or furniture for your new home. Some items, like your old particle board bookshelves, may not be worth the cost of moving. Again, if you are sizing up, you face the potentially fun, but possibly financially draining, challenge of filling the new place.

Maintenance and Renovations

Trees fall on roofs. Gutters need cleaning. Driveways need repair…. A standard rule of thumb is to budget at least 1% of your home’s purchase price each year for home maintenance costs.

Maintenance can include things such as painting, replacing roof shingles, fixing or upgrading plumbing and wiring. The amount you will need to pay for maintenance can depend on the age of the home, the previous owners’ upkeep and the climate.

Homeowner’s Insurance

You won’t be able to obtain a mortgage without homeowner’s insurance covering both the property and its contents. However, the standard insurance may not cover natural disasters such as floods, tornadoes and earthquakes. Depending on where you live, you may want to consider taking out additional insurance to cover such risks.

Private Mortgage Insurance and Title Insurance

If the down payment on your home was less than 20% of the purchase price, you will have to pay for Private Mortgage Insurance. PMI protects your lender in case you default. It’s standard, and fees vary. The rules are complicated, but usually once you have paid down the mortgage so you owe less than 78% of the purchase price, you can drop the PMI payments.

Title insurance offers protection for you (and your lender) if you later discover that someone else could lay claim to the title, and therefore ownership, of the house.

Even if you are lucky enough to avoid paying for PMI, you find a low-cost attorney you can trust, and you have a modern, energy-efficient house, these expenses can still add up to thousands of dollars. That prospect should not scare you away from homeownership, but it always helps to be prepared.

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Weekly Update

The Fed met last week and, as expected, they continue to “taper” their treasury and bond-buying endeavors.

At this time last year, the Fed was buying $85 billion a month in treasuries and mortgage bonds. They are now purchasing only $45 billion a month.

Last week’s Jobs Report was a mixed bag. Over 288,000 jobs were created in April, which is good news, but the Labor Force Participation Rate fell to a 35-year low. This is a measurement of how many working-age Americans are employed or searching for work.

Finally, the first assessment of the 1st Quarter GDP was released and showed the economy grew only by 0.1 percent. It’s important to note that severe winter weather may have played a role in this figure.


Bottom Line for Mortgages:
Rates improved at the tail end of last week on the mixed economic news.

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Weekly Update

The National Association of Realtors is reporting that pending home sales ticked up last month to 97.4 after months of declines. (The index fell 0.8 percent in the Midwest, however.)

The NAR is forecasting 4.9 million existing home sales this year, which is less than last year, but ongoing inventory shortages are expected to push average sales prices up.

Despite recent weakness in housing reports, it appears more Americans are bullish about home ownership, according to a new Gallup survey released last week.

Bottom Line for Mortgages:

Rates have been moving within a very narrow range over the last week and remain very favorable. This week has the potential to stir things up, with the Fed’s Open Market Committee Rate Decision on Weds., and the monthly update to the Jobs Report on Friday.

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Weekly Update

The KC Regional Association of Realtors released their March 2014 Market Report, and our local housing market continues to show improvement.
 
The average existing home price was up 5 1/2 percent in March, compared to last year. New and existing homes pending contracts are also up 1 percent. 

At this time last year, geopolitical uncertainty surrounding the Euro debt crisis in Europe was driving mortgage rates lower here at home. Today, international events – this time in Ukraine – are having a similar impact. 

As a rule, markets “dislike” uncertainty. And the prospect of civil unrest and the potential for civil war in Ukraine is causing markets to react. Events like this typically cause investors to seek out the “safe haven” of bonds, including mortgage bonds. As more investors buy mortgage bonds, that usually drives mortgage rates lower.

Bottom Line for Mortgages:
Rates are moving lower to start the week. 
 
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Weekly Economic Update

First-time initial jobless claims fell by over 30,000 last week, which is a very positive sign that hiring may finally be picking up steam.

The minutes from the Fed’s last committee meeting were also released, and confirm that they plan to continue tapering their bond purchases. This is the program that has helped keep mortgage rates at or near historic lows in an effort to stimulate the economy.

Bottom Line for Mortgages:

Rates improved all last week and remain near historic lows. 

Tax Day Trivia:  The IRS employs 114,000 people; that’s twice as many as the CIA and five times more than the FBI.

 

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Weekly Update

Fannie Mae’s most recent National Housing Survey (NHS) sees signs that home buying activity may pick up this Spring. The share of survey respondents in March who said “It’s a good time to sell a home” increased 4 percent.

The number of respondents who said they think it would be “easy to get a mortgage” also increased last month. Read More Details of the NHS Survey >

More good news from last week came in the form of a positive Jobs Report. Just over 190,000 new jobs were added last month, and the Labor Force Participation Rate also went up. (This is a good sign in a recovery as more people re-enter the workforce or look for work.)

Bottom Line for Mortgages:
This will be a relatively slow news week and rates continue to be near historic lows. 

Weekly Update – April Fools

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CoreLogic reported this morning that home prices rose 0.8 percent last month, with annual growth of 12.2 percent, the fastest pace since Feb., 2006. The Home Price Index (HPI) also includes distressed sales and is the 24th consecutive month of home price increases.

Last week’s Case-Shiller Home Price Index rose 13.2 percent in January, which is further good news on the housing front.

On the labor front, last week’s Jobless Claims report fell to just 311,000 first-time claims, the lowest since last September.

Bottom Line for Mortgages:

Last week’s lackluster New Home and Pending Home Sales reports helped to ease the upward trend in mortgage rates. The Fed will be watching several “big ticket” reports over the coming weeks – including the Jobs Report, which comes out on Friday.

 

(Statue of Liberty seen from Europe. (1934) The Berliner Illustrirte Zeitung ran a photo of the Statue of Liberty. The photo was supposedly taken from Europe by means of “infrared remote photography”. The rocky islands visible in the foreground were England and Ireland.)