You’re looking at real estate listings in your area (or a brand new locale) and thinking, “I can buy one of these.” But is the price you see really the price you get? The answer, more often than not, is an emphatic “NO.”
Besides the cost of actually buying your home, you’ll have to deal with the added fees and hidden costs that can come with taking out a home loan, finding and inspecting the right house, and closing. In addition, you’ll need to factor in the long-term expenses that go along with actually owning a home, including monthly mortgage payment, utility bills, property taxes, and the cost of renovations and general maintenance. Taken together, these can significantly inflate the price tag of a home and put real estate you thought was in your budget suddenly out of reach.
So, what’s the best way to determine the real cost of your next home purchase? The answer comes down to plenty of research, saving, an understanding of each extra fee, and buying from a service that’s upfront with you every step of the way.
The homebuying process isn’t just something you can jump into. Instead, you’ll need to plan ahead, get an understanding of what will be expected of you and the current state of the real estate market. Hopefully, your reconnaissance mission confirms what you already knew — that you have the finances to buy — right now.
Research, research, research. At every stage of the buying process, it’s important to remember that the more information you have, the better. If you’re unfamiliar with the ins and outs of the homebuying process, getting acquainted (by reading sources like the Bungalo’s blog) will be a good starting point. From there, take a look at listings in the area you want to move to get a good idea of what the real estate market is like.
Making a savings plan is a good way to ensure financial stability moving forward. The cost of owning a home will remain even after the closing documents are signed, so having a strong savings account will be essential. How much of each paycheck you want to put away will depend on how much you’re currently spending on housing (ideally it should be less than a quarter of your monthly income) and what kind of debt you also need to pay off.
You may think there’s a certain amount you can spend each month on your mortgage. Your lender, however, may have other ideas. The preapproval process is when a lender looks at your financial information — including factors like salary, credit score, and existing debt — and tells you how much you’re able to take out a loan for. In some cases, it may make sense to talk to multiple lenders, get a loan estimate from each and see which offers you the best rate.
Once you’ve been preapproved, it’s time to start looking for a home in earnest. Even once you’ve found your dream house and reached an agreement with the owner, you’ll need to secure the purchase by paying out the upfront costs — or the initial payments. These include:
Earnest money, also known as good faith money, is the money that you give to the seller before a deal is finalized to show you’re in a financial position to pay the rest. This payment is usually made through an escrow account, which means that a trusted third party holds on to your money until the deal is finalized.
While they’re often talked about similarly, there’s actually a big difference between earnest money and your down payment, if you have one. While earnest money is put on the table to incentivize a final deal and down payment is the initial payment you’ll be making on your home. This can be anywhere from 3-5% of the purchase price to a full cash offer if you have that kind of money on hand. Remember, the more you can pay upfront the lower and shorter your monthly mortgage payment will be.
It’s always good to know what exactly you’re buying when you’re buying it. The flat fee of hiring an inspector could potentially save you thousands of dollars down the road.
In today’s competitive market, many buyers are trying to get the edge in the bidding process. A great way to sidestep this problem entirely? Purchase a Bungalo home. All Bungalo homes come with a third-party home inspection report that was performed upon the completion of the renovations. Having this information gives buyers peace of mind and an advantage on today’s market since they can act quickly on purchasing a Bungalo home. Bungalo also recommends that all buyers get their own home inspection.
At this point, you’ve inspected the home, been approved for the mortgage, and reached an agreement with the seller. Now it’s time to seal the deal. This stage is called closing and, while essential, it can add significantly to the total price of your new home. Much of this will come in the form of fees associated with your mortgage loan — including fees for a real estate attorney and an application fee. You’ll also need to pay what’s called either an origination or loan origination fee. This is a payment for the cost of evaluating your loan application and determining that you’re able to pay what you say you can. A part of this fee is typically used to cover paying for a notary. Many lenders will also charge you in advance for the interest on the first month of your mortgage during the close.
In addition to the mortgage-related costs, there are several other fees and extras that will add to the total closing cost. These include:
A handy checklist or closing cost calculator tool can help you determine what to expect for closing in your area.
The furniture’s in the right place and the walls are painted just the way you want. The family’s all here. Your new house is starting to truly feel like a home. Just because you’re out of the home buying process, however, doesn’t mean you’re done paying
Some recurring costs you’ll probably see once all the ink has dried on your title and mortgage include:
With so many recurring costs that need to be factored into your calculations, it’s important to understand that getting approved for a mortgage loan is just the beginning.
The costs that will come with your new home after close will also vary depending on the kind of home you’ve purchased. Will you need to do significant work on a new abode to turn it into your dream home? If so, is it the kind of work you can do yourself or will you need to hire contractors? If you answered yes to both those questions, then you’ve probably purchased a fixer-upper.
We get it: There’s something truly romantic about turning a run-down piece of property into the home of your dreams. Buying a fixer-upper — a term for a home that’s on the cheaper side and a little rundown but has a lot of potential — may mean a lower monthly mortgage but it also means an additional time commitment, extra costs in contractor fees, and potential quality control issues.
Of course, the total costs of renovating a fixer-upper may wind up being far more than you bargained for. Depending on the state you live in, your property taxes will also increase as the value of your home does with each renovation.
In contrast to a fixer-upper, move-in-ready home is a property that will take no extra work or payments on your part to live in. In addition to not requiring a contractor for basic needs like insulation or a foundation, move-in-ready homes are more likely to have the features and amenities you’re looking for.
At Bungalo, we ensure that all of our homes are move-in ready and meet the standards of our Bungalo Certified guarantee. That includes:
From a sturdy foundation to top-of-the-line renovations you can move into any Bungalo home with confidence.
Post-close peace of mind isn’t the only way Bungalo can make the search for the next home simpler — and maybe even cheaper — than you ever expected. We do things a little differently at each stage of the home-buying process. Here’s how it works:
There’s a lot that goes into buying a house. Bungalo takes a few of these logistics off your checklist. If you know you have the finances to make buying a reality, Bungalo can help you close like a pro.
Learn more about who we are, and how we help potential buyers find the home of their dreams.
This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, real estate, insurance, or investment advice. Bungalo always encourages you to reach out to an advisor regarding your own situation.
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