When you decided it was time to purchase a home, you went through a number of steps to get your finances in order. You probably reviewed your credit report, cut down on credit card balances and reigned in your spending. A monthly budget was probably also an item you stuck to, probably with some aggravation. Once you have an offer for a home accepted, it is important that you keep budgeting for the closing costs associated with the purchase. Here are a couple of odd little fees that can show up and drive you nuts if you are not careful.
I recently met with a client looking to purchase their first home. As we discussed what they were looking for and their budget, they were shocked to find out about closing costs. Being required to pay property taxes and other items can be a nasty little surprise. After all, you do not even own the home yet! The requirement, however, comes because of the nature of how property taxes are paid. They are not paid every month, so the seller has prepaid the taxes beyond the period they will own the home. They will want that money back! You can negotiate this point as part of the purchase, but you need to be aware it is out there. The same is true of insurance.
Other items included in the closing costs for a homebuyer can include:
- homeowners insurance
- legal fees for closing attorney
- title insurance
- appraisal fee
- survey fee
In addition to the above, there are a lot of small fees associated with closing. They can run from several hundred dollars paid to the escrow company to $20 or so for notary fees and so on. If you do not keep an eye out, they can add up quickly to a few thousand dollars.
Closing on a home can be aggravating with all the costs you have to pay. It will all be worth it when you walk into your new home the first time. As you consider how much you can afford, remember to include some monies for these costs.