6 Hidden Costs to Consider When Purchasing a New Home

So, the time has finally come. You’ve worked your butt off, have stuck to your budget, and now you’re ready to buy a home. Congratulations! You’re one step closer to calling your dream home yours. 

However, when buyers consider the cost of buying a new home, they’re typically only taking into consideration their mortgage payment. But, there are a lot of additional costs that you need to consider, too. While some of these may be one-time costs, others may be recurring. Below, we will break down 6 hidden costs to consider when purchasing a new home.

Closing Costs

When it comes to purchasing a new home, the biggest and most obvious thing to consider are the closing costs. Keep in mind, your closing costs can vary greatly depending on which type of house you are looking at. As a rule of thumb, consider your closing costs to be anywhere from 2-5% of your purchase price. 

Within your closing costs, you will have to consider the following:

  • Inspection Fees
  • Appraisal Fee
  • Title Insurance
  • Escrow Fees
  • Loan Application Fees

According to Nerdwallet.com, “the most cost-effective way to cover your closing costs is to pay them out-of-pocket as a one-time expense.” While you may be able to fold them into your loan, you’ll end up paying interest and therefore, spending more.

Property Taxes

While property taxes may cost you a chunk of money, it’s also important to assess how this may work in your favor in the long run. With the market being such a hot commodity right now, it’s important to consider the rising value of the property. This means that, if you purchase a home, there’s no way of knowing whether or not your home’s value will change over time. If it increases, you will end up receiving supplemental tax bills to make up for the taxes you weren’t paying beforehand. 

But remember, your home’s value rising is a good thing! If your home’s value ends up being more than it was originally assessed at, you will be at a better point financially should you ever decide to sell your home.

Utilities

Remember, utilities are a recurring cost, so it’s important to determine the average you are spending each month to make sure you have enough set aside while still living comfortably. Typical utility costs for homeowners will include things such as gas, electric, water, cable/internet, and HOA fees, if applicable.

Luckily, most people already have this part down to a tee. Chances are, you've already grown accustomed to paying utilities if you were renting. However, when you purchase a new home, there may be additional utilities are are paying for that you might not have been before. It's always a smart idea to see the bigger picture of the overall cost to maintain it with more ease.

Private Mortgage Insurance

For those of you who are planning on purchasing a home with a conventional loan, meaning you will be putting down less than 20%, your mortgage lender will require that you pay private mortgage insurance. “Like other kinds of mortgage insurance, PMI protects the lender-not you- if you stop making payments on your loan.” 

Luckily, there are several different ways to pay for your private mortgage insurance, so you can pick and choose what will work best with your finances. While the most common way to pay PMI is through a monthly premium, you also have the option to choose a one-time up-front premium or a combination of the two.

Just remember what we mentioned above, private mortgage insurance protects the lender. This means that, if you fall behind on your payments, PMI will not protect you. So plan accordingly!

Maintenance and Repairs

Ah yes, maintenance and repairs. The end-game typically replicates something you see on HGTV, but the road to getting there may be costly. Typically, home maintenance and repair costs vary depending on the age of the home you are buying. 

For newer homes, you may only need to worry about general upkeep. However, if there are larger, structural issues in the home you are purchasing, this can cost a pretty penny to fix. If you are someone who loves DIY and projects, this might be a challenge you are willing to take on. Nevertheless, it is important to assess what improvements or changes you will be making to your new home and work these updates into your home at a pace that doesn’t break the bank. Our advice? Start with what needs the most attention first, and save the aesthetic updates for later on. 

Moving Costs

Although this is a one-time cost, there can be a pretty big price tag attached depending on the distance you are moving. While moving down the street means you can trade the help of your friends and family for a free meal, it isn’t always that easy. Oftentimes, you will need to rent a vehicle to move all of your belongings or may consider hiring professional movers to ensure all of your things arrive in one piece.

Whatever it may be, we recommend putting on your thinking cap and thinking of ways you can save during your move. This means tossing what you don’t need, selling items that could be re-homed elsewhere, and more!

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Decluttering 101

Whether you are planning to downsize, looking to simplify your life, or just want to get rid of all that extra stuff, decluttering is the perfect way to start fresh as the New Year quickly approaches. However, decluttering can often seem like a daunting task. You may ask yourself, “where do I start?”. No worries, we’ve broken it down for you below.

One Room at a Time

Like all good things, decluttering your space takes time. We often find that the easiest way to start is by completing one room before moving onto the next. Whether you start with your smallest or biggest room first, you’ll feel a sense of accomplishment completing a room fully before moving onto the next. 

Our tip? Start with the rooms that the majority of activities take place. Rooms such as the kitchen, bathroom, or living room are great starting points!

Trash & Recycling

To start out, begin sifting through the items that you no longer have any use for. And take this part seriously! Do you really need that jean jacket from 10 years ago, or those coffee mugs that have collected nothing but dust over the years?

Anything that is paper, plastic or glass, can be recycled. But all of that other stuff? Toss it! It might seem difficult at first but once it’s out of sight, it’s out of mind. In the end, you’ll be shocked by how much tidier your space looks when all of those miscellaneous items are put to rest. 

Storage Bins

Sometimes, no matter how organized you may feel you are, there are always a few extra items that make you think where does this even belong? Don’t worry, we’ve all been there. That’s where storage bins, containers, and boxes come in handy. 

Depending on how extra you’re feeling, you can put as much or as little into these storage containers as you need. Start with the obvious. In each room, collect the small items (we’re talking pens and pencils, work items, cleaning supplies, toiletries, etc.) to free up some surface space. Then, you can move onto the larger items. Pack up your clothes that aren’t currently in season, have a designated spot for your shoes, and more! The limit is endless. 

Tackling Your Closet

We gave your closet a section of its own. For some, it’s the most dreaded part of the decluttering process. Start by separating your closet into clothing type. One by one, collect all of your shoes, dresses, denim, etc., to view at once. Then, decide what you do and don’t want to keep.

It will be much easier to decide what you want to keep versus what you want to toss when you’re looking at your entire shoe or jean collection at once. Whatever you decide to toss, put to the side for now. There are plenty of places you can donate these items. Always remember the bigger cause!

Next, refold and put everything back in the correct place. Maybe you had your jeans on various shelves before - now, you’ll have the room to put them all in the same spot. Slowly but surely, you’ll have the kind of closet they only show on HGTV.

Now that we’ve provided you with the basics, it’s your time to shine.  Remember, all that clutter didn’t get there overnight, so take your time! By taking it room by room, you can slowly but surely tidy up your house and free yourself from any unwanted clutter before the New Year begins. Once your home is in tip-top shape, try and be mindful. Catch yourself before putting something in the wrong spot, throw away items you don’t plan on keeping, and train yourself to keep your space the way you’ve always envisioned. You’ve got this!

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Staging Your Home for Fall & Winter Months

Staging Your Home for Fall and Winter Months

When you make the decision to list your home on the market, you want to ensure that your home is in tip-top shape before buyers come to see it. And while you may feel your home is already in perfect condition, there’s always a few small steps you can make to help with a fast sale. 

To put it simply, staging your home is important. It presents your home in a way that makes it more visually appealing to buyers, and allows them to envision themselves as the newest homeowners. However, the way you should stage your home changes the same way the seasons do. Below are 4 ways to stage your home as the fall and winter months move in.

1. Turn Up the Heat!

A small step that is often overlooked, you want your home to be at a comfortable temperature when buyers come to view it. Think about it, if you walk into a home that is freezing cold, are you going to take your time checking the entire place out? Of course not! By putting your thermometer to a neutral temperature (we recommend between 67-69 degrees Fahrenheit), your buyers will feel comfortable, and allow themselves the time to check out your home in its entirety.

2. Curb Appeal

While you won’t have green grass and flowers blossoming in your favor, there are still plent of things to do to make your curb appeal stand out. In the fall, make sure the leaves are swept away and unsightly branches are moved. In the winter, ensure that your driveway and walkways are free of snow, so buyers can get to your home with ease. 

To spruce things up, add a wreath and doormat for small pops of color, while plants such as evergreens, which can survive even the coldest of temperatures, create a welcoming essence.

Light it Up!

With daylight savings having taken place recently, chances are - it’s getting dark early. However, we don’t want to diminish the star of the show in the darker hours, and yes, we mean your home! Before buyers arrive, make sure your home is well-lit. This means cleaning your light fixtures, switching to brighter light bulbs, and adding lamps or additional lighting where necessary. If showings and open houses are taking place earlier on in the day, be sure top open your blinds to allow natural light in. Nothing says “welcome home” like buyers looking out the window to a winter wonderland!

‘Tis the Season

No matter the season, be sure to dedicate yourself and play the part! In the fall, adding small touches such as candles, corn stock and pumpkins is a great way to spruce up the interior and exterior of your home.

In the winter months, turn your home into a cozy oasis! Adding pillows, throws, carpets, and centerpieces are all great ways to highlight your favorite features. Let the season inspire your decorating, and add small touches throughout to make your home more inviting. And don’t forget to turn the lights to your Christmas tree on!

Another insider tip we have? Bake some cookies or another yummy treat before buyers arrive. Even if you don’t leave them out for buyers to snack on, the enchanting smell is sure to catch their attention.

Remember, staging your home can not only increase your overall home value, but increase the likelihood of a quicker sale. By creating a comfortable, cozy, and colorful atmosphere, you are allowing buyers to envision themselves in the home, and help them determine how they can make that space their own.

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Buying a Home as a Millennial

Buying a Home as a Millennial

For Millennials, there’s often a misconception that purchasing real estate is beyond their reach. Now, many remain home with their parents or rent for an extended period while working tirelessly to pay off debt. However, it doesn’t mean they aren’t interested in becoming a homeowner one day. Not only does owning a home include gaining control over living space and privacy, but you’ll build your equity while having the pride of ownership in your back pocket. 

The hardest part of purchasing a home is always getting started. Here, we will break down three ways to help you save up and own your very first home. The biggest thing to remember is patience.

Saving Up for a Down Payment

When saving up for a down payment, consider how much you need to have set aside before you begin house hunting. Depending on the type of loan you choose, your down-payment requirements can vary from 3%-20%. The two most common types of loan options for first-time homebuyers are listed below.

Conventional Loan: 

Not insured by the federal government, a conventional loan can last anywhere from 15 to 30 years. To qualify, you should maintain a credit score of at least 620, provide proof of stable employment, and have at least 3% of a down payment saved. For lower monthly payments, you can have up to 20% saved for a down payment. 

A primary benefit of having a conventional loan is the option to have a fixed or adjusted interest rate rather than a set rate for the duration of the loan. However, it’s important to remember that if you have less than 20% saved for a down payment, your mortgage lender may require you to purchase private mortgage insurance (PMI).

FHA Loan: 

Easier to qualify for than a conventional loan, a Federal Housing Administration (FHA) loan is government-insured and a good option for those looking to contribute a smaller down payment. 

These loans typically last 15 to 30 years and include a fixed interest rate, so you’ll never have to worry about a fluctuating monthly payment. Eligibility requirements are more flexible with an FHA loan compared to a conventional loan. For credit scores over 580, you only need to worry about having 3.5% saved for a down payment. Anything lower, and you’ll have to have at least 10% of your down payment set aside. 

Similar to a conventional loan, you’ll need to purchase private mortgage insurance (PMI) if you plan to put down anything less than 20%.

No matter which option you choose, start by determining the timeline around which you’d like to purchase a home and begin building your savings. The easiest way to do it is to look at your monthly income and determine what you can put away each month while still living comfortably. 

An easy tip is to set up a recurring weekly payment. It might seem daunting at first, but soon, you’ll adjust and start saving without even noticing. It’s a win-win!

Pay Down Debt

Debt comes in all shapes and sizes. You may be tackling student loan debt, credit cards, auto loans, you get the picture. And while your debt can seem daunting, you need to look at it with the same perspective as saving up for your down payment; it takes time, and you need to be patient. 

Although it varies depending on your type of mortgage loan, a good rule of thumb is to try and keep your debt to income rate lower than 50%. 

Start by determining your fixed monthly costs and leftover take-home pay, then consider how much can go towards your overall debt. When it comes to tackling debt, people often choose either the debt avalanche or debt snowball method. 

Debt Avalanche

With a focus on saving money on overall interest, the debt avalanche method involves making minimum payments on all of your outstanding accounts, then using your remaining leftover to pay off your account with the highest interest rate. 

To be successful, you have to remain disciplined. It will take time, dedication, and motivation. However, paying off your accounts with your highest interest rates first is a great way to save you both money and time in the long run. 

Debt Snowball

If you are more of a visual person, the debt snowball method may be a better match. It involves paying off your smallest debts first, then moving on to your larger accounts.

Similar to the debt avalanche method, you will make minimum payments on all of your outstanding accounts. However, instead of using your remaining leftover to pay off your account with the highest interest rate, you will put that extra money into your lowest account to pay off first. Once your first debt is taken care of, you move onto your next smallest account, and so on. 

While it’s easier to implement and remain motivated, you’ll be spending more money on interest and it may take longer to pay off your debt in its entirety.Once you’ve decided which payoff method would work best for you, you can get creative on how to reach your debt-free lifestyle faster. Whether it’s picking up a side hustle, making some financial sacrifices (do you really need to eat out multiple times a week?), or putting that extra money from a raise or tax return towards your debt, every little bit helps. It may seem like you are cutting yourself short for now, but imagine the financial freedom you’ll feel once you’re officially debt-free!

Work on Increasing Your Credit Score

As mentioned above, when you’re applying for a mortgage loan, lenders will look at your credit score. While the qualifications for your credit score may vary, a strong credit score will mirror your financial efforts and place you in good standings for purchasing a home. Below are a few ways to increase your credit score:

Make on-time credit card payments

No matter how much effort you put into raising your credit score, nothing will matter if you’re making late credit card payments. On-time credit card payments are one of the largest factors in determining your credit score, and a late payment, depending on the size, could last on your credit report for years. 

Minimize your credit card utilization

A good rule of thumb is to keep your credit card utilization under 30%. Having it rack up any higher, could mean you have more difficulty in paying off your overall debt. Although many factors play into what you’re using your credit cards for, tread with caution. The more available credit you have available on your accounts each month, the better!

Keep dormant credit cards open

Another factor to consider when raising your credit score, is taking a look at the length of your credit history. Although not as influential as on-time payments, your credit score factors in your newest and oldest credit card accounts, and averages them together. And the longer your credit history, the better! It will show lenders that you have seasoned experience managing your credit, and provides them the confidence that you will make timely payments.

Even if you have a credit card that you don’t use often, make a small payment, such as on gas or groceries, to keep the credit card open. This will increase the longevity of your credit history, and may help with increasing your score.

Remember, buying a home takes time, and there are a lot of factors that come into play. While it may not happen overnight, work towards each of the goals listed above, and in time, you will get there. Slow and steady wins the race, you’ve got this!

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