Mistake 3: Forgetting About the Hidden Costs of Homebuying
If everything goes according to plan, you may be closing a deal and reaching the end of your homebuying journey. Even here, you could make the common mistake of thinking all of this will be painless. Closing costs, which include several fees that cover final housekeeping matters, are just one example of hidden fees that many first-time homebuyers neglect to prepare for. They can cost you a few thousand dollars or up to 5 percent of the purchase price [source: Greary].
While there are other fees you may pay in your home purchase, here's a list of common fees you should expect to pay:
- Appraisal Fee: When you apply for a home loan, the lender needs to make sure everything is on the up-and-up. They want to know if you are borrowing $700,000 for a $300,000 house. That's why you send an appraiser to estimate the cost of the house you are purchasing, and you'll pay a fee for this.
- Credit Report Fee: Although you may see your credit report annually for free, your lender might require that you cover the costs they pay to view and verify your report. This may be in addition to a loan application fee you pay your lender.
- Escrow Fee: This fee pays for a third, neutral party to handle the funds during final negotiations.
- Notary Fee: To get the business documents notarized, you will be asked to pay the fee for a notary.
- Homeowner's Insurance Fees: Your lender will most likely require you to purchase homeowner's insurance which may include additional fees.
- Property taxes: If the seller has already paid property taxes on the home, you may need to reimburse him or her [source: Motley Fool]. See if you qualify for any property tax exemptions and register for them.
Moving costs, although not exactly hidden, are easy to overlook in the stress of homebuying. People become house poor when they have spent so much on buying a home that they don't have enough to afford other common expenditures.
And don't forget about the costs of getting a house inspection… you did get a house inspection didn't you? We'll talk about this major mistake next.