Getting your financial house in order is the first step toward new home ownership. Meeting with a mortgage lender can help you address any problem areas as well as let you know the amount of estimated closing costs.
But in addition to closing costs and your down payment, there are other expenses to take into account when buying a house. Some will need to be budgeted for prior to closing and some afterward. Here are a few of the most common costs you can expect as you go through the home-buying process:
Homeowners insurance. When you meet with your mortgage lender, they will probably tell you to provide a proof of homeowner's insurance as part of your loan application. Expect your insurance company to request one or two monthly premiums upfront, so plan accordingly. Depending on the property, you may also need flood insurance or other specialty insurance products. Shop around for the best rates.
Property taxes. The cost for property taxes vary by location as well as the value of the property. Ask your agent for information on the tax rate for your new home falls. He or she can also provide you with information on past property tax bills. Typically, metro areas will have higher property taxes than rural one. The assessed value of the property is used as a basis for the tax.
Inspection. Include the cost of the home inspection in your pre-closing budget. Not only will your lender insist on a home inspection to ensure the property is in good condition. Your real estate agent will be able to recommend an inspector. Ask for an estimate, as the cost will vary depending on size of property and the scope of the inspection. Ask your agent if other inspections are advisable, such as a termite inspection or roof inspection.
Upgrades and repairs. You may have asked the seller to make some repairs following the home inspection, but there are still probably some additional repairs and upgrades you may want to make. Some of these tasks can be postponed months or even years from now, but it's still a good idea to set aside a portion of your savings for unexpected as well as planned maintenance and repairs.
Utilities. Your agent can request information regarding the average electric, gas and water bills for your new home. This will help you budget, though keep in mind that costs for utilities can vary according to a number of factors, including how many people are living in the house, the property size and your habits.
Furnishings and decor. Unless you are downsizing, you are probably going to need to budget for some additional furniture for your new home. You may even have rooms you never had before, like a formal dining room, extra bedroom or finished basement. You will probably also want to set aside some money for new decor.