Key milestones for most homebuyers include finding a good location and securing finances for the purchase. The latter ensures that you have a chance in the face of competition with other buyers. However, this process can be quite daunting if the marketplace has a history of bidding wars and high prices such as Denver.
Luckily, this scenario has recently been moderated and first-time homebuyers have a chance to get their feet wet in finding abode of their dream homes. But how do you get started and what key factors should you keep in mind?
Well, if you are aspiring to be a homeowner, you will need to consider recognizing that there is more to buying that dream home than securing its down payment. The home buying process includes several extra costs ranging from upfront costs to the non-refundable out-of-pocket fees. Others are bound to come in after closing the deal and the house is in your possession.
Occasionally, most buyers including the experienced “fellas” get caught off-guard by some of these charges.
Knowing most of these hidden costs informs your saving plan and financial strategy. To help boost your financial prowess in securing that dream home soon, you should plan to talk with lenders in advance. This could mean about 6 to 12 months before your preferred buying date.
For a quick start, here are some hidden costs that can catch you by surprise.
Home Inspection Costs
Once a seller accepts your offer, it is always a good practice to ensure that you will not be buying a lemon. Hire certified inspection personnel to assess the property before closing the deal.
Uncovering any existing but hidden issue beforehand will help you to negotiate the buying terms. Otherwise, fixing these would entirely weigh down on you later on.
Typically, a home inspection would cost you a non-refundable cost of about $200 to $600 but it is not mandatory. However, you should look at it as a precautionary measure that would potentially save you thousands of dollars in repairs later on for a problem you could have identified before finalizing that deal.
Home Appraisal Fees
Mortgage and other serious financial lenders always need to be certain that the house you are about to buy is worth every dime. This, therefore, necessitates the need for a home appraisal before seeing pushing through with the mortgage loan agreement.
Normally, your lender will hire an independent certified home appraiser to examine the value of the home you desire to buy. This process includes evaluating different property features that make it valuable as well as a comparability analysis of recently sold houses in the neighborhood.
Home appraisal fees in Denver largely depends on the property size but would cost you about $250 to $600 on average.
Escrow Account Costs
When securing finances for your dream home, some lenders will require that you also set up an escrow account. Especially, if you have an initial deposit of less than 20% and are servicing other loans.
Money from this account will be channeled to pay for other expenses such as property insurance premiums and taxes on your behalf.
To be safe, you should know that you might be asked to make an initial deposit to this account before closing that mortgage loan agreement and finalizing the deal. Thereafter, you will be required to pay back the lender a little extra and mortgage payments.
To seal a home purchase deal requires more than just a down payment. For starters, you will need an extra 2 to 5 percent of the buying price to cater for closing costs. This covers everything ranging from loan and attorney costs to homeowners association subscriptions and taxes.
The U.S. Census Bureau highlighted a new home sale price as $337,000 in May making its 20% deposit fee $67,000. In this example, the closing costs would range between $6,740 and $16,850.
Home Maintenance and Repair Costs
The joy of finally getting the keys to your own home can quickly be dimmed by other costs that will later creep up on you in the name of maintenance and repairs. This could range from changing the lock system to maintaining your yard. In Denver, for instance, it would cost you about $150 for every mid-grade lock a general contractor installs or $30 per hour for a pro to maintain your 1,000-square-foot lawn.
With all these hidden costs in mind, the best home buying strategy would be to find property priced comfortably lower than the maximum amount approved for your mortgage loan.