• The TRUE COST of buying a new home

    The TRUE COST of buying a new home

    You found the home that interests you. You want to see the property and possibly make an offer. Now what?

    Do not just pick any realtor. Talk to friends and family who have bought and sold homes. Who do they recommend and why? Remember, realtors, are paid by commission. Does this realtor have your best interests in mind, or does he or she march to the tune of that commission check? Those types of realtors are to be avoided. They will try to make the sale at any and all costs to YOUR bottom line. Remember, buying a home is most likely the most expensive purchase you will ever make. The last thing you want to do is do stupid $$ with many zeros following behind.

    Be sure to have an idea of what your credit looks like going into the deal. Remember the housing crash of 2008? Many people lost homes because they had dealt with subprime lenders and financed way too much house. The bank or finance company will look at your credit reports when determining if you are worth the risk of getting a loan from them and determining what your interest rate will be. I personally have a friend of mine who was dealing with a finance company who did two loans for him. One for a low fixed interest rate and the balance of the loan had an Adjustable Rate Mortgage (ARM). When the ARM adjusted, he could not keep up with the payments. That finance company and its mortgage originator just wanted to close the loan. He was overextended on the loan. In essence, he had bought too much house for his financial situation. Ultimately, he lost the house. Understand what you potentially will be paying. A house payment is a lot more than just the house payment itself. It's property taxes (which in my area fluctuates up if a levy is passed of any kind. Typically, property tax changes hit for us January 1, which means that our July tax bill can be higher.), homeowner's insurance (which can also fluctuate), PMI (if you haven't put enough down on your loan), and any interest owed.
    There will always be costs, above and beyond the actual house purchase itself, ESPECIALLY if you are increasing the size of the home. Things to contemplate:

    a. Always get a home inspection as a contingency to purchase. NO exceptions. This cost is IN ADDITION to your closing numbers. I paid the money and had my house inspected for pests, mold, and radon IN ADDITION to the normal homeowner's inspection. Total cost was $1,200, but totally worth it. We had mold remediated by the sellers' contractor and re-inspected at THEIR COST before signing the papers. We also had a faulty main breaker box replaced. A shady realtor will set you up with an inspector that will red flag nothing so that your loan goes through and everything goes "smoothly". My realtor gave me a list of inspectors. After each person's name and company name was all the issues that inspector would check for. My realtor recommended that I go with the inspector that would check for all the issues listed above. BE THERE WHEN THE HOME IS INSPECTED - you want to be able to ask all kinds of questions. I took notes. The inspector showed me major and minor issues and explained the fixes for both. You want this person to be thorough with his/her inspections. This is your negotiating tool. If there are too many red flags and the seller will not fix them, you want to be able to WALK AWAY from the house before you sign final closing paperwork. To be clueless, costs you major cash and may leave you saddled with a nightmare house.

    b. EF. Have it in place for home ownership before purchasing a home. That is your "Oh crap" fund. It should not be confused with SINKING funds, which are used for d and e. It's not a matter of IF you will have something break down, but WHEN.

    c. EDUCATE yourself on home repairs. What they are, how they work, what is normal and abnormal. Everything from fixing a faucet to replacing a roof. It makes you less likely to be taken by a contractor. YouTube is your friend.

    d. Have the inspector give you an idea of approximately how old your roof, furnace, etc., is. This gives you an idea of when you can approximately plan for major repairs. (Ex: If your roof is 8 years old, make sure that you have a chunk saved up for replacement BEFORE you hit that 20-year mark on your shingles. Another example: Look at the date on your water heater. If it is a 6-year water heater, according to my contractor, add another 6 years out from that. It will last ABOUT 12 years.) You have no landlord to fall back on. If it breaks, dies, leaks, or makes noise, it is YOUR PROBLEM to find the money to fix it.

    e. Pay the money and have your HVAC/plumbing/roofing, etc., inspected once a year. You are less likely to get hit with surprises. HVAC is crazy in the summer. I already have an appt set with my HVAC guy to inspect the end of September. That's when his business will slow down, it's before winter freezing for us, so it's a win-win situation. DO NOT HIRE someone who is not licensed, bonded, and insured to work on your property. Catch potential problems when they are molehills, and you are less likely to deal with mountains. Just my .02. Do not just hire the first guy that pops up on an internet search. Consider those contractors as your housing specialists. Just like you would not have your dentist do your heart surgery, hire an HVAC guy to inspect your HVAC, etc. Rely on their expertise in their field.

    Additional costs that need to be factored in. Some can wait, some you'd do before moving in:


    Buying appliances
    Repairs that you agreed to take on as part of the home buying process vs the seller making repairs.
    Additional storage - If you need to add extra cabinets or any extra storage. Also, keep in mind that you may require a countertop at that point.
    Curtains/blinds
    Paint and/or steamer, scorers, scrapers, fabric softener, and joint compound (We had to remove four rooms of hideous wallpaper, I kid you not.)
    Pulling out carpet and adding new or refinishing floors underneath.
    Locks (no one else needs keys to the house but you)
    Furniture - your existing furniture may not fit or you may not have certain items if you are moving from smaller to larger. Thrift store and estate sales are your friend.
    Extra linens if you have increased bedrooms or changed bed sizes.
    If you've increased the number of bathrooms: extra plungers (who wants to run steps to grab one from the other bathroom), toilet brushes, toilet paper, toilet paper dispensers, bathroom waste cans, shower curtains.
    Lawn/snow equipment if you have gone from renting or an HOA to home ownership with no frills.
    Flowers/grass/mulch - beautifying the outside of the house
    Fencing - if you see yours is starting to have issues, make note that you may have to fix it sooner rather than later.
    Outdoor furniture
    Carpet cleaner and/or vacuum cleaner - Our carpet cleaner did not survive our move. We have a dog. Guess who's on the hunt for a new carpet cleaner
    Utility deposits

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