It’s no secret that purchasing a home will most likely be one of the biggest financial investments in your life. Understanding and planning for the upfront and ongoing costs associated with the home-buying process are essential before deciding to commit to a mortgage. Here is a breakdown of the additional home buying costs and fees you can expect when purchasing a home.
Upfront Home Buying Costs to Plan for When Purchasing a Home
The down payment is money paid for a house from one’s own funds at closing. The down payment is the difference between the purchase price and the mortgage amount. Calculate your down payment here to get an estimate of how much you should budget and save. If you’re having trouble saving for a down payment, learn about the different Down Payment Assistance Programs that may be available to you!
These settlement costs will need to paid upfront to gain ownership of your property and close on the loan. Calculate your closing costs using our closing cost calculator and check out our blog to learn the different ways to pay for closing costs.
Origination & Underwriter Fees
A percentage fee of the loan amount is charged by a lender as compensation for processing a loan application. (e.g., for commitment, underwriting, or loan applications).
To obtain a lower interest rate, you can pay your lender in exchange for the better rate, 1 point = 1% of the loan. Learn more about mortgage points and how they’re calculated.
These are settlement services that are required by your lender. Some examples include third-party services such as appraisal fees, credit report fees, flood determination fees, etc.
Other Upfront Home Buying Costs
These may include the real estate transaction fees to transfer the property to your ownership.
Ongoing Home Buying Costs to Plan for When Purchasing a Home
Monthly Principal and Interest
These are the main items that make up your monthly mortgage payment. The principal is the amount of money you’re borrowing, and interest is a calculated percentage of your loan that you owe your lender for borrowing money. Find out how much your monthly mortgage payment would be using our calculator.
An escrow account can include property taxes, homeowners’ insurance, or other charges that are bundled together into a monthly payment.
If you don’t plan on putting 20% down on your loan, you likely will have to purchase mortgage insurance. This is a safety net for lenders in case borrowers cannot complete their payments.
If you purchase a home in an HOA community, there are typically additional monthly fees you must pay. Learn more about these fees and the pros and cons of buying into an HOA community to see if this option is right for you.
Home Maintenance, Repairs & Utilities
No matter the property, it’s essential to plan for home maintenance and repairs. It’s best to have extra funds on hand in case there are costly repairs or appliances/systems that need to be replaced. Additionally, you will need to account for utility bills like water, sewer, gas, and electricity. Remember, generally the larger the property, the more your utilities will cost. Learn about the 50/30/20 Budget Rule to help manage your utility costs.
When planning for a home purchase, there are many costs and factors to consider. Although it’s important to save and plan accordingly, don’t let all these costs stop you from starting your homeownership journey. Our expert lenders will work with you step-by-step through the process to help create a personalized solution that works best for you. Contact Direct Mortgage Loans today!