Buying the home of your dreams can be full of costs you may be unaware of. Most of these are unavoidable and buyers must make sure that they have enough funds put aside to meet these expenses, in addition to finding the down payment. Here are the eight most common expenses.
Closing Costs
Closing costs are the fees charged by mortgage lenders and third parties related to the purchase of your home.
They include a fee for checking your credit report, loan origination fee, government recording charges, appraisal fee, title service fee, and title insurance. Some buyers are able to negotiate with the seller for a contribution toward these costs; otherwise, expect to pay between 2 and 5 percent of the purchase price in closing costs.
Inspection Fees
While the cost of a home inspection may seem like an additional expense when buying a house, it is important to get one in order to ensure that the property is in good condition. The average home inspection fee in Las Vegas is between $300 and $500.
Home inspections can help identify any potential problems with the property before you buy it, which could save you thousands of dollars in repairs down the road. Therefore, even though it may be an added cost up front, a home inspection is worth the investment.
For example:
– If there are any major repairs needed, you may be able to negotiate with the seller to have them taken care of before you buy the property.
– If there are any safety issues, you can address them before moving in.
– If there are any cosmetic issues, you will know about them ahead of time and can plan accordingly.
Overall, getting a home inspection is a wise investment that can save you a lot of money and hassle in the long run. If you are buying a property in Las Vegas, be sure to find a reputable home inspector to perform the inspection.
Property Tax
As long as you know the assessed value of your home, you can calculate your proposed property taxes yourself and it really isn’t as hard as it looks. The formula is straightforward and only requires a calculator.
Once you have an understanding of your property tax rates, you will be able to more effectively plan your payments in your budgeting strategy. The following example of calculating property taxes has been done using district # 200 rates ( Las Vegas )and is assuming a property value of $ 250,000.
Also, keep in mind that this calculation does not take into account any property tax exemptions that your home may be qualified to receive.
1. Calculate the assessed value by multiplying the taxable value by the assessment ratio of
35% (Nevada state law sets this ratio) … So in this example:
$250,000 x .35 = $87,500 (your assessed value).
2. Locate the property tax rate for your particular district. Your district is # 200 and the in 2012- 2013 fiscal year the property tax rate was set at 3.2782
3. Simply just multiply the property tax rate by the your assessed value .032782 ( district tax rate) x $87,500 ( your assessed value )= $2868.425
4. Your property taxes would be calculated at $2868.43 per annum.
Mortgage Insurance
If you’re buying a home and plan to make a down payment of less than 20 percent, you’ll need to get private mortgage insurance or PMI. This protects the lender in case you default on your loan. The cost of PMI varies, depending on the size of your down payment and the type of loan you have, but it can range from 0.5 percent to 1 percent of the loan amount per year.
You can usually cancel PMI when you reach 20 percent equity in your home by asking your lender to remove it, but there may be some restrictions or fees involved. You can also wait until you have paid off enough of the loan so that the equity in your home is 20 percent or more.
When figuring closing costs, don’t forget to factor in PMI if your down payment is less than 20 percent. This added expense can range from $500 to $1,000 or more a year, depending on the size of your loan and the type of loan you have.
If you’re buying a home with a government-backed loan, such as an FHA or VA loan, the rules for getting PMI are a little different. Talk to your lender to find out more.
Homeowners Insurance
Another closing cost when buying a home is homeowner’s insurance. This is a policy that will help you financially if your home is damaged or destroyed. The cost of homeowner’s insurance varies depending on where you live, the size and type of home, and the amount of coverage you choose.
In Nevada, the estimated cost of homeowners insurance is $1,100 per year. If your home is damaged in a natural disaster such as a wildfire, your insurance policy will help pay for the costs of repairing or rebuilding your home.
Make sure to shop around and compare rates to find the best policy for you. You can get quotes from different insurers online or by calling them directly. It’s important to have enough coverage to protect you financially if your home is ever damaged or destroyed.
In Nevada, the buyer pays for their own homeowner’s insurance.
HOA and Condo Fees
If you are buying a home with an HOA, you will have additional closing costs.
The HOA may require a portion of the sale proceeds to be used to pay off the previous owners outstanding dues. In some cases, the HOA may even have a lien on the property, so it’s important to factor these costs into your budget.
You will also be responsible for paying the HOA’s assessment fees. These fees are used to fund the HOA’s operating expenses, and they are typically collected on a monthly or quarterly basis.
When you purchase a home with an HOA, you should budget for these additional costs so that you can avoid any financial surprises down the road.
In the Las Vegas area, some neighborhoods are part of multiple associations, incurring more than one HOA fee. There are also a number of master-planned communities that charge higher HOA fees because they include amenities like gated entry, fitness centers, and swimming pools.
No matter what type of HOA you’re dealing with, it’s important to be aware of the potential costs so that you can budget accordingly.
Moving Costs
While not added to your costs at the closing table, moving costs need to be considered. These costs can range from hiring a professional mover, renting a truck, and paying for fuel, or even just the cost of your time if you choose to move. Moving costs will vary depending on the size of your home and the distance you are moving.
You can figure a day of moving could cost anywhere from $750 – $1500.
To get an estimate of your specific moving costs, it’s best to use a moving cost calculator. But as a general rule of thumb, the American Moving and Storage Association estimates that the cost of an interstate move will be about $4,300 for an average two-bedroom home.
If you’re moving a long distance, you might also have to pay for things like storage fees if your belongings can’t fit in your new home right away. And don’t forget to factor in the cost of any necessary home repairs or renovations you might need to make once you’re settled in.
#8: Maintenance
When the keys are delivered you’re on your own: which means that if the pipes burst in the early hours of the morning, you’re the one who has to fix it.
Having a few DIY skills can help keep the costs down, but there are some things, such as mitigating mold in a damp basement, that you may not be able to do yourself.
Home maintenance costs run, on average, to 1 to 2 percent of the home’s value each year, though older homes may cost more. Aim to establish an emergency fund to handle any unwelcome surprises.
The Good News
It’s worth noting that most of the additional costs borrowers face aren’t exactly hidden and, if you’re worrying about whether you can afford a home, you probably shouldn’t. Here’s why. By law, your lender must make sure that you can afford your mortgage.
Before underwriting your loan, the lender adds up your monthly expenses, including your mortgage payment and all the costs listed above, and verifies that these expenses do not exceed a certain proportion of your income – a maximum of 43 percent, but most lenders look for a lower debt load of around one-third of your income.
After all, they don’t want you to run into financial trouble and not be able to make the monthly payment.
Before you close, you’ll receive an estimate that sets out the costs associated with your home loan.
In other words, you know upfront what your closing costs are going to be and can budget for them. If you’re not sure about anything, ask your Las Vegas real estate agent (702)-604-7739 to reach Ballen Vegas and connect with a lender to guide you through the process.