Are you thinking about buying a home?
Maybe you’re in the process of buying a home and wondering ‘am I missing something?’. In this video we are talking about the hidden costs of buying a home and sharing some pro tips to reduce your expenses now!
If this is your first time here, welcome! If you’ve been here before, thank you so much for coming back and spending your time with me. My name is Lindsay and I‘m proud to be your Anthem, Arizona REALTOR® with the Wise Move AZ Team at Realty ONE Group. On this blog and on our YouTube channel we have a lot of fun talking about all things Anthem and real estate every single Thursday, and we absolutely love having you along for the ride.
There’s more to it when buying a home
I probably won’t surprise anyone when I say there’s a lot more to buying a home than just the purchase price. It is important to us that you know what to expect and how to budget for it. We also want to help you keep a reasonable reserve fund that you can turn to if an unexpected expense does arise. None of us like surprise expenses, but the most prepared and organized of us, can roll with the punches when they come our way.
Owning your own home is totally different from renting or living in a home that you do not own. Home ownership is wonderful in so many ways, but it is expensive and requires careful planning and budgeting. In this post we are looking at the hidden costs you can expect to incur in two categories:
- Pre-Closing and Closing Costs: These are expenses directly related to the purchase of the home.
- Post-Closing Costs: These are costs that may be incurred immediately after the purchase or shortly thereafter.
Pre-Closing & Closing Expenses
I would love to tell you that you just need to come up with your down payment and ‘poof’ you’re in the house, but that would be a lie. Instead you will probably find yourself incurring home expenses almost from the moment you go under contract. Let’s talk about what they are and how to cut them back.
#1: Inspections
It is likely that the first expenses you will have in the home buying process are the inspections. These will vary depending on the condition of the home and might include:
- a general home inspection,
- a termite inspection,
- an HVAC inspection,
- a pool inspection.
If you want more information on what inspections to consider when purchasing a home, click to watch this video. The bottom line is that you will need to be prepared to lay out some of your hard-earned cash on inspectors pretty quickly.
Inspections are one area that I don’t recommend cutting back on. You can shop around for pricing, but I never recommend going without inspections just to save some cash up front. Chances are it will come back to haunt you.
#2: Lender Fees
If you will be paying cash for your home, you can ignore this. If you’re getting a loan, there will be fees associated with getting the loan in place. This can include credit reports, appraisal fees, commissions, and more. It is important to shop around for a lender you trust and is up front about their fees.
#3: Title/Attorney Fees
In Arizona very few home purchases require an attorney and most people choose to use a title company to handle the transaction. Either way, they will have fees and costs associated with ensuring that the title for your new home is put into your name.
#4: Escrow Fees & Adjustments
Your escrow officer will ensure that the money paid by you to purchase your new home is dispersed to the appropriate parties and finally to pay the remaining balance to the seller. Examples of the things that the escrow officer adjusts and handles payment of are:
- HOA fees,
- Taxes,
- Insurance,
- The seller’s mortgage.
The buyer may be responsible for payment of all or a portion of the escrow fees. Escrow fees are usually determined based on the purchase price of the home and vary from one company to another. Chat with your agent or escrow officer; they will be able to get you estimates on the Title and Escrow fees before you get too far into the home buying process.
#5: Interest
Ugh, interest. Nobody loves paying interest, but it’s a reality when you have a mortgage associated with the purchase of your home. Be prepared that your lender may require that interest due on your mortgage for the period between your closing date and the first day of the next month be paid in advance.
#6: Utilities
You might be thinking, ‘of course, I have to pay utilities when I buy a house; that’s a given’. The part that surprises some people is that some utility companies require an initial upfront deposit before they will activate services. It may depend if you’ve had service with them before and what your credit score is.
When I first moved to the US, I didn’t have a credit score so my deposits added up to nearly $500. Ouch! I, of course, got that money back, but it was a bit of a surprise, for sure.
#7: Insurance
If you are getting a loan, chances are you’ll be required to maintain insurance on the property. Even if you’re not getting a loan, I strongly recommend that you get and keep insurance. The best way to save money on insurance is to shop around. I know it’s tedious, but a couple of hours of shopping around could save you a ton of money each year.
#8: Home Warranty
As a buyer, you may want a home warranty in place to protect the major systems of the home. I recommend asking that the seller pays for a one year home warranty in your offer documents. This is fairly common in Arizona.
If the Seller refuses, I encourage you to do some research into different providers, what they cover, and how much they cost. Decide if it is worthwhile for you to purchase your own coverage, or if you are better off to set money aside for major repairs.
#9: Taxes
You may be required to a pay a portion of property taxes at closing depending on how taxes are assessed and paid in your area. I recommend that you talk to your escrow officer if you are worried about this amount.
Unfortunately, I don’t have any great hacks for reducing property taxes. It’s just one of those things.
Post-Closing Expenses
Now let’s talk about the expenses you’re going to incur after you close on the house.
#1: Moving
Are you debating whether you should hire professional movers? If so, you may want to check out this video. Hiring movers can help to reduce stress but may add significantly to your bill. If you move yourself, you may be able to save some money.
#2: Appliances
Does the home you’re buying include appliances? Including things like the fridge, washer, and dryer in your purchase contract can save you a lot of money when you move in. Let’s be honest you can’t go very long without a fridge. If it doesn’t include appliances, this is something you will need to budget for.
#3: Maintenance & Repairs
When you own your own home, all maintenance and repair costs are your responsibility and will vary depending on the age of your home. Obviously, older homes tend to be more expensive to maintain than newer homes but there is no magic number here. For newer homes it is probably safe to budget about 3% of the purchase price of the home and for older homes you may want to ratchet that up to about 5% of the value of the home per annum.
If you allow your “Maintenance and Repair Fund” to accumulate over time (i.e. you don’t spend the money on something else if you have some left over at the end of the year) it should cover you for the mid-range expenses such as painting the exterior and the big ones such as roof replacement when they “unexpectedly” turn up.
My best tip for saving money on maintenance and repairs is to try doing it yourself. Have a leaky faucet? Why not try fixing it yourself before calling in a plumber or handyman? There have been a few projects that have required the professionals at our house, but other than that we go to the school of YouTube for our home maintenance lessons.
For a list of home maintenance items you can’t afford to forget, click to watch this video.
#4: Ongoing Expenses
Every month you will have expenses such as utilities, internet and cable. You may also have quarterly expenses like HOA fees and trash collection, and annually your expenses will be things likes taxes and insurance.
We recommend that you track all your expenses and budget for them with a 5% cushion to keep you safe when your various providers present you with rate increases. If you’d like tips on cutting your utility bills, click to watch this video.
#5: Home Improvements
Most homeowners want or need to make improvements such as updating kitchens and bathrooms or do “add-ons” such as decks, patios and fire-pits.
We know, we know, you HATE the carpet in bedroom.
There is no end to what you might want to do to improve your living space. Budget for them so you can enjoy those improvements, free of financial stress! Also, keep in mind that they don’t all have to be done at once. Your home is a work in progress. Be patient.
#6: Miscellaneous
There are potentially hundreds of other expenses associated with owning a home, some you can avoid by doing yourself, others you will want to hire out which creates additional costs. Some of those expenses that come immediately to mind are:
- house cleaning services,
- pool maintenance,
- security systems, and
- pest control.
There are many others, and you will learn what yours are, as you come across them.
So, there you have it! I hope you’re feeling ready to pay off the hidden costs of buying a home with confidence. If you’re thinking about buying in Anthem, Arizona and would like more information on working with us, drop us a comment below or send us an email at Team@WiseMoveAZ.com.
Additional Resources
If you’d like tips on maintaining your home to save money, click to watch this video.
If you’d like advice on navigating your home purchase in a buyer’s or seller’s market, click to watch this video.
Enjoy those and I’ll see YOU next Thursday!
