Because buying a home is one of the biggest expenses you will pay during your lifetime, there can be a lot of little expenses, charges, and costs associated with its purchase. And it can be helpful to know what they all are and how much they will be. Here are some tips to help you prepare for the expenses of buying a home so that you can be more prepared financially.
When you buy a home, you take on the responsibility of paying for the home's property tax. This tax is paid to the city and is usually due at the end of the year.
However, when you buy a home in the middle of the year, your closing documents will show you how much property tax you will owe for the rest of the year. You can often be required to pay for one to two months of a prorated property tax amount at closing, which will be included in your home's closing costs. Then, when you make your monthly mortgage payment, each payment will include a monthly amount toward the total bill, which will be held in escrow until the property tax bill comes due.
Talk to your real estate agent about how much a home's property taxes were last year and what it is estimated to be the next year. They can help you calculate this amount in your property tax portion of your closing costs.
When you buy a home with a mortgage, you will also need to apply for a mortgage through a bank lender or mortgage broker. No matter where you apply for the financing, you will likely need to pay for a variety of costs associated with this.
For example, you will first pay for an application and credit report fee, which covers the processing of your application and the cost to order your tri-merge credit report, which includes information from all three credit bureaus. Next, you can also expect to pay an underwriter's fee, which pays the individual who pays to research whether or not to approve your loan.
In addition to the underwriter, you will pay the loan officer an origination cost to cover the costs with their administrative work on the loan. If you are paying upfront points on your loan to buy down the mortgage interest rate, this will be included in your closing costs also.
Keep these financial aspects in mind as you look at single family homes for sale to find one that is right for you and your family.