Buying Home: Preparing for All the Associated Costs

Piggy bank, paper house, and stacked coins

Piggy bank, paper house, and stacked coinsWhen it comes to paying for a new home, many buyers turn to mortgages to finance a portion of the purchase. If you don’t have enough cash to pay the house in full, a home loan will allow you to borrow a certain amount of money (plus interest) that will be paid per month over a certain period of time, based on your chosen mortgage term.

Even with a mortgage, you still need to make a down payment to cover a portion of the sale price. Many think that making a 20% down payment is necessary, but as this benchmark has become increasingly unattainable, you can now pay between 3% and 5%. Making a big down payment, however, is advisable to score low rates, avoid private mortgage insurance, and have lower monthly payments.

Apart from down payment, you also need to prepare for other costs associated with buying a house. Home loan providers in Ogden share some the things you need to save for when getting a mortgage:

Closing costs

As its name suggests, closing costs are the fees paid at closing of the transaction. These costs can vary on the type of house you buy, the location of the property, and your chosen mortgage. Some of the fees included in the closing are appraisal fee, loan origination fee, application fee, and homeowner’s insurance. The amount may be between 2% and 5% of the purchase price. You can use this calculator to calculate your closing costs.

First loan payments

You may need to pay a full month or more as your first mortgage payment. As you get closer to the closing date, the lender or lending company will provide you with an estimate of this cost, so you can start saving some money. Your reoccurring monthly payments, meanwhile, are likely to be due on the first of each month.

Home inspection

Before buying a home, it is best to have a professional home inspector to check the condition of the property. This will help you avoid the costly mistake of purchasing something that is in need of major repairs. According to Home Advisor, the average home inspection cost is around $315, but this may also depend on where you live and the size of your home. You may also require specialty inspections like mold or radon testing.

It is best to learn about the other costs you need to pay for besides down payment. You should also avoid depleting your savings just to pay a large down payment. Note that you still need to have enough money to cover your first loan payments, as well as associated and unexpected costs. It is also best to work with a reliable lender to learn more about your mortgage options.