Buying a home can be an exciting and overwhelming process. We want you to be informed and confident whether this is your first purchase or your 100th! Avoid extra stress by knowing all the fees associated with buying property:
1. Down Payment
Your down payment will likely be the largest out of pocket cost of purchasing a home (if you are financing the property). The down payment amount will vary based on the type of loan you are using. Down payments can be a little as $0 with a VA loan or 20% of the purchase price with conventional financing. Private mortgage insurance is usually required for properties purchased with less than a 20% down payment so talk to your lender about the down payment your loan will require.
2. Earnest Money
Earnest money is used to show that a buyer is serious about purchasing a property. The buyer can choose any amount to put down as earnest money but it may be lost if the buyer decides to back out of the purchase. Earnest money is usually held by the Title/Escrow company. A typical earnest money deposit is 1% to 3% of the purchase price.
3. Closing Costs
Closing cost are an accumulation of fees that are paid at the end of the process, called closing. These fees include realtor commissions, mortgage underwriting, taxes, insurance, title and escrow, HOA fees and more. All of these fees will be provided in a settlement statement prior to closing. Typically these costs will range from 2-4% of the homes purchase price.
4. Homeowners Insurance
It is essential to insure the largest purchase you will probably ever make. Standard homeowners insurance will repair or replace your home in the event of damage such as fire, wind, lighting, hail, smoke and burglary. You can add additional coverage for flooding and other events. The national average annual premium is $2,103.
*If you currently own a home: With the rapid increase in home prices it is a good idea to call your insurance company to make sure your home is insured for its current value. It will cost you more per month, but it could save you in the event of a disaster.
5. Property Taxes
Every home owner pays property taxes. Local governments use the revenue to pay for schools, roads, parks, fire departments, emergency services and other community needs. These taxes are also based on the value of your property and can be paid monthly or annually. Kootenai County has a 0.62% average effective property tax rate (2022).
When you move into a new home you will have to pay to start utility services. These installation fees are usually small but if you move into a larger home your overall monthly expenses may increase. Gas, electric and water can vary widely depending on your habits, whether you are connected to city services or have a well/ septic system and the amount of property you own.
7. Moving Costs
If your anything like me, moving is a daunting task that also comes with additional costs. Costs can include things such as hiring a moving company, renting a truck, purchasing supplies like boxes, tape, bubble wrap and repairing/cleaning your old home/rental.
8. Costs for Your New Home
Depending on your previous living situation, buying a home may come with a list of additional costs. HOA fees, higher utilities, gardener, trash and repairs can all add up. Try to research all of these before closing so you aren’t surprised when you move in.
It is likely you will have to purchase some new furniture/ appliances when you buy a home. The sellers may take the refrigerator, washer, dryer and other appliances with them. You can ask for these items to be included in the sale. Just make sure to tell your agents before you write the offer. To reduce your furniture expenses try to reuse what you already have. Remember, as temping as it may be, you don’t have to buy everything as soon as you move in. Live in the space for a while so you can make the best choices for your home and wallet.
10. Unexpected Expenses
Unfortunately life is unpredictable. We never know what will happen, so it is important to prepare for unexpected expenses. This is a great reason to not purchase at the absolute top of your budget (easier said than done in the market, we know).