First time home owner costs: what to expect
Being a first-time home owner probably means you are completely scared, lost and way over your head. This is one of the biggest things you will ever do, so it comes as no surprise that you are a bit scared. Everyone around you has a lot of advice. They usually throw a lot of big words at you, and they mention a lot of costs. Much more costs than you have previously planned for. Too bad there is no manual that can help you with this. Don’t worry we got your back. Here you can see what you can expect when It comes to first time home owner costs.
Buying your first home is a huge step. Doing anything for the first time is scary, and it is a pretty big decision. It’s a no false statement that you are going to need more money than you think. But, what are exactly first time home buyer costs? Ok, we know you know about the down payment. But, what else? Check this list and find out.
First time home owner buyer costs start with insurance
Insurance is necessary for any major life decisions, so it’s a no surprise that it plays a major role here as well. But it’s not that simple. We will try to break it down for you. There are three insurance categories you have to be aware of:
- Homeowners insurance: this one is necessary. It is used to cover the expenses of rebuilding and repairing your home. It will also help you protect your personal belongings. One of the first time home owner costs is this one because it can protect you against liability claims. It is also necessary to have it by many lending institutions.
- Mortgage insurance: this one isn’t a necessary first time home owner cost. It will not be required in case that you can put down more than 20 percent on your new home.
- Supplemental insurance: this is not so important for everyone. But, if you are a first time home owner that has chosen a dangerous area then you should purchase it. What is a dangerous area? Well, if it flood-prone, or earthquake-prone, then you should reconsider.
Don’t forget to include renovating your home
This doesn’t list high on the set of your priorities, but it should. A portion of first time home owner costs should be taken aside for this. Of course, home sellers will take care of all the major costs. But they will not repair everything. And even if everything is in good shape, you will still spend money on improvements. You are going to need to personalize the house and add your touch. All of this will require money. Nobody will oblige you to do this, but you will feel the need. Perhaps a bit of paint, or new windows, or clearing out the backyard… This house should feel like home. And that takes money out of your wallet. Read this article, get inspired and get to work!
First time home owner cost everyone forgets: decoration and furniture
While you were focused on big expenses, the smaller ones have crept up and scared you. Although there will be a lot of things included in the purchase, not all of them will come with the house. Appliances, furniture… Not to mention decoration. It may seem like a non-important cost, but it will not be like that when the total comes. Revise your contract a few times, talk to your seller… Change the terms if you feel like that is necessary. Just have in mind that the most overlooked first time home owner cost is precisely this one.
What is earnest money and why do I need to pay it?
Being a first time home owner means you don’t know what is expected of you. Don’t let the big words scare you. Everything that is necessary is easily explained. One of the first home owner cost to have in mind is the earnest money. What is its significance? This money has the role of a deposit until the purchase application goes through. This way the person selling the house knows you are serious. After the deal is closed this money forms part of the down payment, so it will not be given in vain. If you are not sure that you want to buy that particular house revise the contract twice. You will then see what happens to your money if the deal falls short. There is no universal rule, it depends on contract to contract. Earnest money is usually only 1-2% of the total purchase, so don’t worry.
First time home owner cost you should not avoid: appraisals and inspections
These two costs are something that serves the buyer even more than the seller. That is why they should not be avoided, although they are one of the major costs. Appraisals are usually billed to the buyer, although that doesn’t have to be the case. Its purpose is to define an accurate price and to provide some safety net. They should not be confused with home inspections. Their purpose is not to allow your new house to give you a nasty surprise. They look for faulty plumbing, termites and all sort of infections. This can be a major issue down the road, so it shouldn’t be avoided.
When it comes to first time home owner costs there will always be one too many than you thought. There is no way to avoid them, but you can make them smaller. If you are indeed paying for something, you should make sure that it’s worth your money. Some of these costs allow you to even save money down the road. Just plan for all of them and act accordingly. Everything will be much easier if you know what are you up against.