Hidden Costs of Buying a Home

You can see it now. You’re enjoying a leisurely brunch in the sun-soaked breakfast nook in your brand new home. It’s completely perfect, but just a daydream until you buy the house. Envisioning your life as a homeowner is exciting, full of promise and anticipation.

Finding your next home and discovering all the blissful possibilities of having more room, the perfect kitchen, or a new lifestyle suited exactly to your personal taste is an exciting endeavor. But such a quest may also bring with it a host of stressful challenges, not the least of which are the hidden costs of buying a home.

But fear not, you can do it. Even if you’ve never owned a home before—with a determined mindset and some thorough preparation, you can face down those hurdles associated with buying a home and make your way to the finish line. One key to achieving your goal is to do your homework.

This includes careful consideration, not only in finding the right house but also in selecting a real estate agent who will best represent your interests and finding the right mortgage loan for your financial situation.

You know you’ll have to plan for a down payment, but there are more financial intricacies and expenses involved when buying a house. Here are a few to consider.

Where to Begin

A good place to start is to figure out your budget and take a look at your credit report. You may find it immensely helpful to have an understanding of how much house you can possibly afford and approximately how much cash you will need for a down payment and any additional fees, such as applicable closing costs when buying a house.

Your credit report may help provide clarity into your overall financial health and give you an idea of your credit score. Lenders will review this information when determining what mortgage terms you may be eligible for. This is a good time to make sure that there are no errors in your report and to do some research on ways you may be able to improve your credit score . A higher credit score may offer better loan terms in some cases.

Lenders will also review other factors like your debt-to-income ratio. You may want to keep this in mind and avoid taking on any additional debt before buying your home.

What to Expect

Every real estate transaction has the potential to throw you a curve ball or two along the way. That’s why vetting and interviewing candidates to find the right real estate agent will give you peace of mind should you encounter any unforeseen bumps in the road.

You’ll also want to make sure that all of the income documents required when applying for a mortgage are in order so you can get pre approved as quickly as possible. These would include items like your most recent paystub, W2s and asset statements.

In addition to a number of ‘givens’ that you may run into along the way, there will likely be some unknowns that are particular to the specific home you’ve set your sights on.

It could be the sellers, it could be the property itself, or the market. For example, are there ‘as is’ conditions or potential issues that could show up in the home inspection, preliminary title report or impact the appraisal and possibly the lenders’ willingness to lend on that property due to health or safety issues present on the property?

It’s true that some issues are not always easy to spot but an experienced agent can be a valuable asset. Don’t be afraid to ask pointed questions if you have concerns about any step of the process and keep in mind you can request to be present for most home inspections.

It can also be a good idea to investigate the market where you are looking to get a good sense of what’s available, what is a good value and how competitive the market you want to enter is going to be.

Making an Offer

Once you have found the home of your dreams, there may still be hurdles to overcome. Depending on the circumstances, there are a number of opportunities to encounter further hidden costs of buying a house.

It’s important to note that if a buyer decides to back out of an accepted agreement without cause, that buyer may lose their deposit . Though it’s not required, if there appears to be legal inconsistencies present, you could consider engaging a real estate lawyer when buying a house. If you plan to consult with legal counsel, be sure to factor that into your budget.

It’s also important to closely review the contract prior to signing. Once you have signed a contract to purchase a house, you will be responsible for making an earnest money deposit and should you choose, hiring a home inspector to evaluate the property.

Everything from the condition of the roof to HVAC, plumbing, appliances, wiring, termites, and radon, are some of the items that are generally assessed. The inspector should then provide you with a thorough report identifying any issues related to the overall condition of the property.

If there are serious repairs needed, address them with the real estate agent and seller. Lenders will typically not close a loan on any property where health and safety issues are present.

Depending upon the severity of the repair, the seller may choose to cure any problems or reduce the purchase price or give you a credit towards your closing costs. If the owner refuses to cure the repair, then you may be able to withdraw from the sale and receive a refund on your deposit.

The Home Stretch

Depending on a variety of circumstances, there may still be a few potential hidden costs of buying a home before you can get to closing day. Closing costs can add up quickly.

You’ll usually need to budget for things like escrow or attorney closing fee, property valuation, lender fees, title search, title insurance, homeowners insurance, property taxes, and don’t forget to factor in moving costs. It’s usually worth getting estimates from multiple moving companies.

In most situations, the lender will require the property to be appraised in order to establish market value before finalizing the mortgage. As for any other miscellaneous items, your realtor and your lawyer should be able to provide you with comprehensive checklists throughout the contract period.

If the property is a condominium, there may also be homeowner association fees (HOA) and other special assessments And many homebuyers budget a little extra to have the locks changed on their new house.

At the end of the day, all of the challenges will be worth it once you’ve settled into your new abode. It’s just a question of doing your research and trying to remain methodical. When considering a mortgage for a home purchase, SoFi’s online application can help facilitate an easy and convenient prequalification process.

With affordable down payments, fixed and adjustable rate loan programs and exclusive member discounts, SoFi can help you get more from your mortgage. Happy house hunting.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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