As a home buyer or investor there are expenses that you expect from a transaction. You expect that you you will have to pay for your monthly mortgage, pay for the inspector to check on your purchase and the down payment for the house. But there are other unexpected expenses that you may have overlooked.
So, before closing the deal, make sure that you have enough cash reserved to cover these expenses.
1.Mortgage Payment
It is not enough that you can afford to pay for your monthly mortgage payments. Let us say, if you have a monthly mortgage of $500, you should have at least $1000 extra. The half goes to mortgage and the other half to savings. You have to have reserved money for emergencies and other unexpected expenses.
2.Other Fees
Not everyone requires these payments, but it has been known to happen. Here are other fees: Credit report fee, Flood certification fee, Origination fee, Processing fee, Appraisal fee, Underwriting fee, Application fee, Discount points, Loan lock fee, Broker fee, Commitment fee, Tax service fee and Miscellaneous administrative fees.
3.Taxes, Taxes, Taxes
Many states, though not all, require various taxes and transfer registration fees. Every state is different in terms of their tax law, so research your area or state. Some even charge a sales tax or a stamp duty. You have to know what else will you be paying for after the purchase to avoid financial problems.
4.Vacancy Allowance
Buying a house and then turning it into a rental is one way of getting back your money back. But one must understand that your place may be vacant some months of the year. To learn the budget on running your rental unit during vacancy, ask local property managers that are willing to share their expertise with you.
5.Insurance
This expense may be the most important of all. Yes, it may save you money monthly of you skip the insurance, but when tragedy strikes, you will be thankful for your insurance when you need to rebuild your house. Do not take insurance for granted, they are there for a reason, take advantage of it.
6.Maintenance and Repairs
Like anything else, you must maintain and occasionally repair your property. Figure about a tenth of your savings for this basic expense. The number can fluctuate wildly depending on the age of the house.
7.Utilities
Unless you plan on living on candles and rain water, you have to pay for your monthly utility bills. If you are planning to rent out your house, you may want to discuss the payment beforehand with whoever is renting.
Consider all these unexpected expenses when you buy a new home, so you do not get any nasty surprises on your moving day.
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