If you're planning to buy a house, there are some costs that may be unexpected and for which you should be prepared. Read on if you don’t want to be caught off guard.
Budgeting homebuying costs isn’t easy. While your down payment is certainly important, it’s not the only thing you’ll be spending on. Bearing that in mind, don’t forget these other costs when planning to buy a home:
1. Earnest money
Earnest money is a good faith deposit made after your initial offer is accepted. The general rule of thumb for earnest money is 1 percent of the sales price, but some listing agents and sellers may expect between 3 and 5 percent.
2. Appraisal fee
Before you can be approved for your mortgage, your lender will need a professional appraisal showing how much the home is worth. As the buyer, you’re responsible for paying the appraiser’s fee.
3. Inspection fees
Although an inspection is not required, the amount for a standard home inspection and a separate inspection for termites should be on your list of expenses.
4. Closing costs
While closing costs may come as no surprise, the amount you have to pay can easily be one of the largest unexpected expenses when buying a home. Closing costs are typically around 3 percent of the purchase price.
5. Repairs and upgrades
One final category of expenses not to forget when buying a home is renovations and repairs. Even if you are buying a new house there may be things to want to change before living in the house, so remember to budget for these expenses too.