When buying a home, one should be financially prepared for any and all costs. Be prepared for underlying costs such as taxes, earnest money for escrow, closing fees, and monthly mortgage.
Knowing exactly what other fees to pay as you plan on buying a home will give you the chance to prepare your finances properly. Here are the 5 important costs you should look out for:
- Private mortgage insurance
If you want a conventional loan but cannot afford the estimated 20% down payment on a home, then you will be required to pay for private mortgage insurance (PMI). Lenders would add this particular fee to the mortgage they grant to a homebuyer. This acts as a buffer from losses that may be incurred should the homebuyer default on the loan.
Do note that the PMI only protects the lender and not the buyer. Should you default on your loan, you do not get that PMI returned, plus you could lose your home through foreclosure.
- Title insurance
This particular insurance keeps the homebuyer protected from title issues. It protects against all unforeseen claims and liabilities that could put both your finances and ownership of the property at risk.
The title insurance is paid only once upon closing. For California homebuyers, it could cost from $1,200 to $2,000 for a $500,000 home.
- Homeowner’s insurance
Homeowner’s insurance protects you financially from losses and damages to your home due to disasters, theft and accidents. The average homeowner’s insurance mainly covers interior and exterior structures, personal belongings, and also any injuries that may occur in the property. Even detached structures such as a garage or gazebo are included. However, standard policies do not pay for losses or damages due to acts of God like floods and earthquakes.
Choose a policy that can match the cost to rebuild your home. While also considering personal belongings, create an up-to-date home inventory so a claim can be more readily settled, should the need arise.
When a seller accepts your offer, you need to deposit “earnest money”— usually 1% to 2% of the home’s value — into an escrow account. Doing this assures the seller that you are serious about buying the home. This money is usually held onto by a third party, together with other pertinent documents for transferring once the deal is done. These funds will only be released during closing time when all home appraisals and other forms are completed and submitted.
- Appraisal fees
For an objective estimate of a home’s fair market value, you need to hire the services of a professional home appraiser. Lenders need this expert’s assessment to confirm the amount you want to borrow.
Apart from finding out the fair value of your home, the home appraiser will also comb through the entire house for superficial and/or structural issues. That way, you will know the extent of maintenance or repairs required by the house for you to determine if it is worth buying or if you should let it go.
Learn more about the costs involved when buying homes for sale in Ojai, CA by getting in touch with an experienced California realtor. Contact me, realtor Donna Sallen, at 805.798.0516 or email donna4remax(at)aol(dotted)com.