Must know Hidden Costs when Buying a House
HIDDEN COST #1
Closing fees and prepaid fees. What are those fees? When you get a loan, you have underwriting fees that the lender charges, and you have points that the lender may charge you. It could be half a point or a whole point, which is the commission that the lenders charge you. There are also appraisal fees to consider. Closing expenses are typically between 3% and 5% of the purchase price. So, on top of your down payment, whether it’s your FHA loan, which you may receive with as little as three and a half percent, or your VA loan with 0% down, you still have closing fees to consider. Or, if you’re putting 10% or 20% down on a $500,000 house with a conventional loan, let’s suppose you bring 10% down. You need $50,000 and up to $15,000, so anywhere from $9000 to $15,000 in additional fees to pay upfront.
HIDDEN COST #2
Do a home inspection. A lot of times, the buyer wants to bring their uncles or moms or somebody who knows about contracting to inspect the house. However, we do not recommend it. We strongly advise hiring a professional, qualified home inspector. So they go through the house and examine everything, including the electrical plugs, plumbing, air-conditioning floor, closets, and locks. So they double-check everything. This might cost between $500 and $600. That is a standard price in Orange County. You may want to have an initial inspection at times. Assume you have a swimming pool and wish to get the pool equipment inspected. All of this can add up to anywhere between $500 and $1,000. So, if you decide to buy a house, keep track of these seemingly insignificant charges. And I hope you are considering purchasing a property.
HIDDEN COST #3
HOA Fees or Homeowners Association Fees. In Orange County, a regular fee for a townhome complex is at least $300. I’ve seen it go up to $500. Association fees in gated communities range from $700 to $900 per month. That is an additional expense. So, if your mortgage payment was $3,000 and you now add $400, $500, and $600 per month for association fees, that’s the same as paying your mortgage principal and interest. Consider the association fees before purchasing a home. Speak with your lender. Make sure you qualify with this association fee, whether it’s $200, $300, or $500, because they will include it as an expense. With new houses being developed in newer neighborhoods like Irvine and Rancho Santa Margarita in Orange County, many of these communities have high Mello-Roos and assessment taxes, which might add $300 to $400 to your monthly payment. So, in addition to your closing costs, downpayment, and association fees, many newer communities have melrose tax and assessment fees, which are extra taxes that may cover public schools, water, and parks that the builders must develop and pass the cost on to buyers.
HIDDEN COST #4
When you buy a house, you are overjoyed. When you move in, anything might happen. A roof leak is possible. I remember buying my house in the 1990s. I could barely afford it, and I could barely cobble together a down payment. We purchased the house in July and lived there for two years. There was a lot of rain. And both years, we had major roof leaks that I had to repair. I ran out of money and had to borrow money to repair the roof leaks. I patched it up the first year, which cost me thousands of dollars. Then, the following year, it rained again, and I had to repatch it. So that was costly for me. Anything might happen; your air conditioning or other systems could fail. That’s one thing to expect for “emergency repairs,” but be prepared to pay for routine upkeep, such as yard work. If you acquire a house with a pool, the equipment will be operational, and you may need to repair it. When buying a property, there are a number of unexpected costs, or in this case, projected costs, to consider. Another expense that I did not consider is that we have a large yard. So, when we acquired the house, we had to employ a gardener because I didn’t have time to grow. And that gardener now costs me $135 per month. Fortunately, I can afford it because he charges a modest amount. But that’s on top of my association fees, mortgage payments, repairs, and everything else. As a result, these hidden costs do pile up.
HIDDEN COST #5
Utility bills. So, when you buy a house, you anticipate paying mortgage and interest, taxes and insurance, association fees, repairs, and now utility expenses. It used to be light water and gas, but in this high-tech age, we have electricity, water bills, and trash bills, and you have to figure out a WiFi bill, internet connection, and if you want cable, which every home has, or WiFi Internet TV, those are all extra charges. That may amount to $500,000, $600,000, or $700,000 every month. We only recently paid. We acquired a property in the desert, and our power bill was $700, which we had no idea would be so expensive. We paid the bill despite the heat. So, before you buy a house, be prepared to pay for your utilities. Look around to see what the averages are, as well as what the electric and gas bills are. Is there solar power in the house? If the house has solar, you may have to assume responsibility for the solar payment, which might range between $300 and $400 per month, but it could save you money on your electric bill. However, that expenditure is incurred at the outset. Utility bills are really important. Know what your bills are, and what your association fees are, and then put all the unforeseen bills on top of your principal and interest, tax, and insurance, or PITI, and then buy the house.
Assume you were expecting all of these fees, but you desired a pool or a huge yard. So, did you know that if you have a pool, your water bill, as well as your power or gas account, would increase because it rains all the time and the filter runs all the time? The water evaporates in the summer. Because you have to continue filling the water, the cost mounts up. Of course, if you have a large yard, you can have additional maintenance work done on it, but it will cost you more in your water bill because the larger the yard, the higher the water bill. And, on average, outdoor water or landscaping water accounts for 60% of our water bills, at least in Orange County. The bigger your yard, the higher your water cost.