Dear Claire: What Should I Expect to Pay When Looking at a Home?

Understanding the Hidden Costs of Buying a Home

Let’s say that I’m a buyer and I’m buying my first home and the house is listed at $400,000. Obviously, you may think, “Oh, I’m just paying $400,000 for this house.”

But wait, no! That’s not what is actually happening. So, a couple of things I’m going to separate are your down payment and closing costs. There’s a lot of different fees associated with your purchase and some of those fees you are paying for the future of you living in that house. So those fees that are often categorized as closing costs include your property taxes for the year, your homeowner’s insurance for the year, your loan fees for you getting a loan on the property. If you’re lucky enough not to have a loan on the property, that won’t bug you, but most people have loan fees, an appraisal fee, and all that’s in your loan fees and then title and escrow fees. So, I might be buying a house for $400,000 and I’m actually paying all told once it’s all figured out, it’s more like $412,000 at the end of the day.

Now, again that’s my property taxes, my homeowner’s insurance, some lender fees, and some title and escrow fees. All of those combined make me end up paying more than the actual purchase price of the house. So that’s important for you to know because most people are like, “Oh, okay, all I need is my down payment, and my down payment only has to be paid.” There are certain levels of down payment, therefore, my down payment can be 3%, 5%, 10%, or 15%, or 20%. Above 20%, when you’re buying a home to live in as your principal residence, you don’t actually get any more credit for that additional down payment. It doesn’t really behoove you to put more than 20% down on your principal residence. If you’re buying an investment property, you have to put 25% down. But that’s a totally different ballgame.

In every purchase, you’re going to have to reimburse the seller for property taxes or pay your bank so that they can pay your property taxes for you. Sometimes people are like, “What are the hidden fees?”

There’s some things that you probably didn’t expect, because all you were expecting was your down payment, and it’s not just your down payment that you’ll be paying.

I’m always here as a resource and am happy to chat with you about any questions you might have. If you want me to address any questions that you have you can just reach out via the good old-fashioned phone. We also have our Paris Group Realty, LLC YouTube channel. If you want to check out any other additional topics, feel free to check us out over there. I hope you have a wonderful day and we’ll talk soon. Take care.

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