Beware of Additional Costs When Buying a Home

Most Common Added Costs

Home Inspection
Obtaining a home inspection is no surprise and most real estate professionals recommend this to their buyers. The cost of the inspection varies depending on the location and size of the home and a few other factors.

Prorated Property Tax (Common Gotcha)
Taxes are usually pro-rated during escrow and often result in an added out of pocket expense for the buyer. Here’s an example of how it works in California. If the seller has already paid the property taxes for the next six months and the buyer takes occupancy at month two, the buyer must reimburse the seller for those four months already paid. The arrangements are made by the escrow company, but for the buyer, it’s often a surprise and another unexpected expense.

Special Bond Assessments
Verify with your realtor if the property you are purchasing comes with special bond assessments, a Mello Roos tax and/or Homeowner’s Association (HOA) Fees. These costs can be quite hefty and must be tacked on to the total monthly payment equation. If your agent isn’t warning to you of these potential additional costs, you may want to consider finding another that is also an Accredited Buyer’s Representative.

When calculating the cost of buying a new home there are almost always
 some surprises and many people forget to include some of the
 miscellaneous fees, taxes and insurance costs associated with owning 
property. All of these additional costs can definitely add up, and put what you 
thought was an affordable home out of your financial reach on closing day.


13 Additional Costs to Watch For When Buying a Home

Here’s a list of 13 additional costs you may incur when you buy a new home.
 Budgeting in advance will help you turn what might be a financial nightmare
 into a smooth transition as you move into your dream home.

1. Appraisal Fees: The lending institution handling your mortgage may require an
 appraisal on the property before they proceed with the loan. The buyer is 
responsible for this cost, which may run up to around $500.
2. Property Taxes: Your lending institution may opt to include the cost of your 
property taxes into your mortgage payment, depending upon the size of your
 down payment or other factors. If they choose not to do that, you will be
 responsible for the annual or bi-annual payments yourself, and you may need to
 provide annual proof to your lending institution that these taxes have been paid.
 Often buyers are surprised at the pro rated amounts they are responsible.
 Example: If seller has already paid through the end of the tax year and you buy the home
 three months prior to the end of the tax year, you must reimburse the seller for the three
 months already paid in advance!
3. Property Survey: Your lending institution may require an updated property
 survey if you are not the first owner or original owner of the property. Surveys can
 be moderately expensive, ranging from $700 to $1000

.
4. Property Insurance: Your lender will require proof that you are carrying a 
homeowners insurance policy on your new house that will adequately cover the 
replacement value of your home, which is different from the purchasing price.
 Also, be sure to ask your Realtor about any possible Mello Roos Taxes!
5. Service Charges: Most utilities, such as water, power and cable, may require
 additional deposits or installation fees for a change of service.
6. Legal Fees: You may elect to have a lawyer review all the paperwork for the 
purchase of a home before closing. Rates can vary greatly according to the 
expertise of the lawyer, and the size and complexity of the real estate transaction.
7. Mortgage Broker Fees: Mortgage brokers can charge you a fee to secure your 
financing with an appropriate lending institution, although many will try to get the 
lending institution to share or absorb these fees.
8. Mortgage Loan Insurance Fees: This type of insurance, which can cost from 0.5
to 3.5% of the total mortgage, can usually be worked into the monthly mortgage
 and property tax payments. You may be able to avoid this type of insurance if you have enough of a down payment.
9. Moving Costs: The cost for movers is no surprise but the amount is! Professional movers can be extremely expensive
 for a van and three movers. These prices can rise significantly during peak 
seasons. Also, even if moving yourself, there are still costs involved, so be
 prepared.
10. Homeowner’s Association Fees: Condominiums, townhouses, and single family
homes in planned communities usually charge a monthly homeowners 
association fee for the maintenance of common grounds, recreational areas, and 
other amenities. In some neighborhoods, it’s surprising how expensive these
 monthly HOA fees can be!
11. Water Quality Certification: If the water supply for your new home is provided 
by a well, then you should have the quality checked by a local expert. These fees
 may or may not be the responsibility of the new owner, depending upon where
 you live.
12. Local Improvements: Property taxes can be affected dramatically if large
 municipal improvements, such as the addition of sidewalks, water treatment
centers or sewage systems, have been made recently.
13. Land Transfer Taxes: These taxes are generally assessed whenever a piece of 
property changes hands. The amount can vary greatly, especially if the value of
the land has increased substantially since the last change of ownership.