Thinking of Buying a Home? Calculating the Costs

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If you are thinking of buying a home, it is important to know all of the costs involved because it isn’t simply the price of the home itself. This is the most obvious cost. When you are buying a home, the largest portion of the cost is the sales price of the home, which will make up the bulk of your mortgage. However, there are other large costs that must be considered.

Your Monthly Property Tax

Most mortgage companies will add your monthly property taxes into your monthly mortgage payment. You are no financing property taxes, but they tack them onto your mortgage and pay them for you. For example, if your mortgage payment is $1,500 per month on the house alone, and your property taxes are $5,000 per year. The mortgage company will add $416.67 to your mortgage so you will be paying now $1,916.67 per month. That’s not it though.

Your Home Owner’s Insurance

If you have a mortgage, you will be required to carry home owner’s insurance, and again, the mortgage company will usually require you to pay the money to them as part of your mortgage, and then they will pay the home owner’s insurance company. So, if your home owner’s insurance costs $600 per year, or $50 per month, tack this onto the numbers above, and your monthly mortgage payment becomes $1,966.67.

Your Other Insurance Requirements

Depending on where you live, geographically, you may be required by your mortgage company to carry hurricane, flood, or other insurance in addition to a regular home owner’s insurance policy. As with the home owner’s insurance, you will be responsible for paying the monthly cost to the bank along with your mortgage, so tack that on top too.

Your Closing Costs

1. The Down Payment on the Home – A traditional mortgage loan is a 30 year fixed rate mortgage with 20% put down at closing. Of course mortgages vary, but any down payment could be made part of your closing costs.

2. Title Insurance & the Title Search – This is a one time payment, and is required by the lender.

3. Attorney’s Fees – You will want to hire an attorney to handle all of the legal documents for you, including the purchase contract and bank documents. The attorney will also handle the closing with you, at which time his fees are paid.

4. The Home Inspection – You mortgage company will probably require a home inspection, and even if they do no, it is highly advisable to get one. Though this cost is usually paid at the time of service, it is considered a closing cost.

5. Appraisal Fees – You lender will require an appraisal of the property. Such fees are paid as part of the closing costs.

6. Recording fees, Wire Fees, etc. – Other fees that must be factored into the closing costs.

It is important to realize that all of these 6 described costs are one-time costs. You will pay them at the closing table, but they will not be part of your monthly mortgage payment. That being said, these fees can easily cost $6,000 or more.

Be Prepared When Buying a Home

Just be prepared and knowledgeable when buying a home, especially as a first time home buyer. Make sure you have factored in all of the costs before leaping from home renter to home buyer.


Emily Gojko: I am a writer, marketer, and manager with a strong background in real estate development and management. I am also a native New Yorker with an obsession for home design shows, so I have personal and professional experience making the most of small spaces, and dealing with good and bad living situations.

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