I've been thinking about buying a home in the near future. I know there are tons of expenses that tend to appear while you are in the process of buying a home AND once you own it. What are some things I should be aware of?

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Definitely something I would like to know more about as well. I have just started putting my info out to try and get more information on getting a loan for a house. What are some fees that one might not know about or may be a little hidden when it comes to getting a loan on a house?

A few pieces I learned from my own experience buying homes -- once in Virginia, another a few years later in Florida...

You see realtor fees when you SELL a house, but not when you buy. When you sell, you have to pay a percentage to your own realtor and to the realtor of the buyer. I bring this up even though you're looking to BUY because my first time around, I didn't realize what a big hit this would be when we sold a few years later. Because this piece didn't affect us when we purchased our first home, I underestimated how much it would affect us when we sold the home. We were able to sell the house for more than we purchased it because we'd made some serious upgrades, but we didn't profit much once we factored in realtor fees.

Realtor fees are typically 6% (3% to each party) but you can negotiate that to some extent, especially if you're in an expensive market. And of course, some folks sell without a realtor -- that's a process I'd love to learn more about!

Another piece to think about is house improvements. Even if you go through an inspection, you might find necessary improvements once you move into the house -- and they might end up being more expensive than you'd expected. No matter how much you learn about the property, you won't know it well until you move in, so I'd aim to have a fund built up in case you have a problem that needs to be fixed quickly.

Hope that helps!

Melissa posted:

Thank you, both! @Alexis Grant, when you purchased your houses and had home inspections, how did that work? Did the bank set something up and the inspector provided you with a report? Or did you hire an inspector yourself and do a walk through with them?

Melissa,

 

We are currently in the process of purchasing our second home and have hired an inspector ourself. We had the option of hiring separate ones that do the general inspection and then looking for ones that check the sewage system. I cost analyzed each and we saved a little bit of money by going with the inspector that does it all. We chose to have a general inspection, sewage, radon, water, of which the total cost is $1,240. Another cost to purchasing a home! We will do the walk through with them on Friday and then wait a day or two for the report.

Our first home was purchased through an FHA loan so the lender set up the inspection and we had no influence nor participation in it. It was a lot cleaner as there was less leg work I had to do on my end, but no knowledge of the fees until closing nor any control on minimizing.

Good luck!

@Melissa Honestly, it's been a while so the details are fuzzy. But I believe the realtor knew someone who could do the inspection (not the bank) and set that up for us. We weren't on-site for walk-through, but if it's an older house that might be a good idea. I remember being impressed my first time going through this how comprehensive / long the report was!

I just bought a house in the past year.  My realtor gave me a list of inspection companies in my area, along with what each one inspected.  He said that he was not legally allowed to recommend one.  I went with the company who had the longest list of criteria inspected for (radon, mold, water damage, plumbing, electrical, structural, slope of yard, boundary line).  I didn't want anything missed.  IIRC, the inspection cost about $1300 here in Ohio, but it was the best money ever spent.  There WERE issues.  We were able to negotiate repairs and price with the seller.  The entire report was sent to my realtor and me, with the bank requesting a copy.  We sent the full report to the seller, with a "you'll fix this, you'll credit this (thereby dropping the price), or we'll walk away."

Also, don't go spending any money until the loan closes.  You'll run the risk of losing the house.  If you're getting a bigger house, realize that it's more to furnish.  Between new appliances and furniture, window coverings, I easily spent an additional $15,000 after the loan closed.

We are currently in the process of purchasing our second home and have hired an inspector ourself."

@FreebiePharm Congratulations on your new home! You bring up some great points. I have no idea the fee would be that high.

I'm sending good vibes to you, so everything will be smooth during the process to finalize the documents and get the keys to the house! Do you have any projects you would like to do on the house/ yard once you move in? 

AnnieB posted:

I just bought a house in the past year.  My realtor gave me a list of inspection companies in my area, along with what each one inspected.  He said that he was not legally allowed to recommend one.  I went with the company who had the longest list of criteria inspected for (radon, mold, water damage, plumbing, electrical, structural, slope of yard, boundary line).  I didn't want anything missed.  IIRC, the inspection cost about $1300 here in Ohio, but it was the best money ever spent.  There WERE issues.  We were able to negotiate repairs and price with the seller.  The entire report was sent to my realtor and me, with the bank requesting a copy.  We sent the full report to the seller, with a "you'll fix this, you'll credit this (thereby dropping the price), or we'll walk away."

Also, don't go spending any money until the loan closes.  You'll run the risk of losing the house.  If you're getting a bigger house, realize that it's more to furnish.  Between new appliances and furniture, window coverings, I easily spent an additional $15,000 after the loan closed.

@AnnieB Wow, I love this! Thank you for the information, this is so helpful! Just out of curiosity, when you negotiated the repairs, did the sellers actually fix any of the issues themselves or did they calculate the cost to fix and enter that amount as a seller concession? 

@Melissa - we had seller credits AND seller repairs.  The seller had a faulty Federal Pacific electrical box (they are known to catch fire) that we demanded that they replace.  (It was the main electric box.  It involved the seller calling the electric company and having them pull the meter so the electrician could change the panel. I knew this since my father was an electrical contractor.) There was mold in the attic that we had them hire a remediation company for and show written proof it was taken care of.  Then there was minor plumbing and electrical that all added up (house sat unoccupied so the fixtures all leaked and didn't have shut off and no GFCI plugs in wet areas), plus two windows where the seals were shot.  We asked for seller credits on those since we planned on changing out all of the windows anyway and wanted them to match.

My advice is that when you get a home inspection (not IF, when), if issues pop up send the entire inspection report over to the seller.  We were able to use it as a bargaining tool and say "if you take care of this, we'll deal with that.  You don't have to deal with the windows, just give us a credit.  We'll take care of the GFCI issues and plumbing issues." It also shows that you're reasonable.  I didn't ask for them to do all the work.  If you go with a government loan (FHA or VA), the inspection report stays with the property for six months, which is another incentive for the seller to get the house sold and take care of repairs.

I am closing on a home in Idaho on Tuesday so all of this is fresh in my mind!

Some expenses could be:

- Home Inspection: This cost us $250

- Closing Costs: We negotiated the sellers to pay this but they usually run 3-5% of the purchase price. If you look at the CD (Closing Discloser) it will break down all of the costs. From making copies of documents to paying title fees, lender fees, and appraisal, everything is charged. With the loan we used (conventional), we were able to have the sellers pay 3% of the purchase price toward the closing costs which left us $407 extra to pay.

- Earnest Money: When writing an offer, an earnest money check is included which is held in escrow until the purchase goes through. This can be used toward a down payment or closing costs.

- Down Payment: If you pay down payment of 20% of the purchase price, you will not have to pay a monthly Mortgage Insurance. We paid 3% of the purchase price which was required by my loan. We will be paying a monthly mortgage insurance until we reach 22% equity. At that point, the MI will drop automatically. This is specific to our loan.

Be sure to ask your lender about MI and what loan you are using. Most loans, you will have to apply to get the MI dropped. This requires an appraisal and once it is valued at you owning 20%, you can drop it.

- Upgrades: If you need to update anything in the home right away, this is something to consider. The only thing of concern for our home was the broken dishwasher. The sellers agreed to pay us $400 cash out of escrow toward a new dishwasher. This saved us some money. You also want to take into account any appliance purchase. In the state of Idaho, the only required appliance that is included with the purchase of a home would be the oven. You may need to purchase a refrigerator or washer and dryer.

I wish you the best of luck in your home buying search! Be sure to find a great realtor. 

P.S. A trick someone told me was if you know a realtor personally, but they are not in the area, you can have them refer you to a realtor in the area and maybe they will give you their referral bonus toward closing costs. My friend did this with her mom who is a realtor in Colorado.

 

Kirsten

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