Sunday, July 9, 2023 / by Steve Ticknor
The Real Cost of Buying a Home
Before You BuyDown Payment - Of course. This is probably the first thing you thought of when I talked about "cost". Unless you pay all cash or are a veteran using a VA loan to purchase your property, you need to come up with a down payment. FHA loans require at least 3.5% down. On a $500,000 home, that means $17,500 at the very least. But that is only the first in a long line of actual costs.
Closing Costs - Closing costs are the fees for services required to complete the sale of your home. They include prorated HOA and property taxes, title search, loan origination, appraisal, credit check, and sales tax, among others. According to Bankrate, expect these fees to run about 2-3% of the home's purchase price. That means tacking on another $10,000 to $15,000 to your home-buying expenses.
Inspection Costs - At the very minimum, you want to obtain a general home inspection. That costs approximately $300 on average. However, depending on the home and outcome of the general inspection, you may want to hire other inspectors who specialize in different areas (plumbing, pests, roof, electrical, mold, etc.). That brings these costs up even more.
Mortgage Insurance - If you borrow more than 80% of your sale price (ie, put less than 20% down), your lender charges you PMI (private mortgage insurance). This protects the lender in case you default on your loan. The amount charged depends on your credit score and how much you put down on your loan. It can cost you a couple hundred dollars extra a month.
After You BuyProperty Taxes - Benjamin Franklin once said that "nothing can be said to be certain, except death and taxes". Boy was HE right! In Mohave County, property taxes cost about 0.07%. For a $500,000 home, that means $3500 per year. But that may change from year to year.
Homeowners Insurance - These costs vary depending on your home's location, size, condition, level of coverage, and the amount of your deductible (among other things). On average, Arizona homeowners pay roughly $1530 on average per year for a standard policy.
HOA Fees - If your home resides in a Homeowners' Association, you pay HOA fees. These can either be paid through your mortgage escrow account or paid privately by you, the homeowner. Some buyers like to include it with their mortgage payment so they aren't scrambling to come up with the hundreds or even thousands of dollars required when due.
Maintenance Costs - Things break down. It's inevitable. And when they do, you need to repair or replace them as needed. According to USA Today, the average homeowner may expect to spend roughly $3000 per year in maintenance costs. And that's if nothing major happens.