4 Homebuying Costs That Are Often Forgotten

Every prospective homebuyer knows that they need to save additional money beyond just the down payment for closing costs, which generally total between 2% and 5% of the purchase price. Although closing costs include many of the various fees that are required to seal the deal on a home purchase, they don't cover them all. As a result, buyers often fail to budget for any extra expenditures that are incurred during the final phases of the buying process. Keep reading to find out about some of the most common costs that you should expect to encounter while grabbing that dream home!

Think you have enough money on-hand for extra expenses? You might want to reconsider. A survey by TD Bank found that more than half of homebuyers were charged with over $2,000 in unplanned costs, while 10% faced a bill at least $5,000 over budget! Now that I've got your attention, here are four of the most common unexpected costs associated with homebuying.

1. Inspections Aren't Free

Hopefully, you're planning on having a home inspection before signing on the dotted line. Although this process costs a few hundred dollars, it can prevent you from being stuck with tens of thousands in repair costs after the sale.

2. Extra Cash at Close

The actual closing will often cost more than the official "closing costs". Lenders often require you to pay a year's taxes upfront, and buyers will sometimes need to pay back the seller a prorated amount of any prepaid taxes or homeowners association dues on the property. These charges will obviously vary greatly from home to home, but can cost several thousand dollars.

3. Moving Money

It seems obvious, but many prospective homeowners fail to budget for the cost of moving. The exact amount depends on numerous factors, such as distance, amount of stuff, and location, but it can reach into the thousands if you hire professional movers. The costs will be lower (but not nothing!) if you move everything yourself, but it will still take considerable time, gas, and probably a truck rental.

4. Startup Costs

Even after you've moved into your new abode, you shouldn't let your financial guard down. Relatively small fees such as changing the locks and setting up the utilities might not be large on their own, but they can pile up. In addition, even with a clean inspection, you should keep funds on hand for at least one major repair in the first year. In general, professionals recommend that homeowners maintain a 6-month emergency fund to prevent going into debt over a roof repair, furnace replacement, or similar disaster.

Source: "4 costs you haven't factored into your homebuying budget"