You're interested in buying a home. That Stone Oak lifestyle looks good. You've saved up a nice downpayment (anywhere from 3-20% of the purchase price). But the downpayment marks just the beginning of the amount of money you'll need to make this house your home. Many buyers don't think about the many hidden costs of buying a San Antonio home. So you won't be surprised, I've given you a list of "hidden costs" that you need to be aware of before signing your final paperwork.
Hidden Costs of Buying a San Antonio Home
Your earnest money deposit constitutes the first of the hidden costs I'm going to talk about. Buyers consider earnest money akin to a "good faith deposit". Typically, your earnest money deposit runs around $500 to $1000. Sometimes, though, you might want to put more here. Why? In a highly competitive seller's market, a higher earnest money deposit shows the seller how serious you are about purchasing their San Antonio home. Once you enter escrow, this money either returns to you directly or can be used as part of your downpayment. However, if you cancel due to any reason not covered by a contingency clause in your sales contract, you forfeit all of your earnest money. Talk to your San Antonio REALTOR® to find out how much you'll need for your earnest money deposit.
Next to the downpayment, closing costs mark one of the highest of the hidden costs you'll pay when buying a San Antonio home. These run anywhere from 2-5% of the purchase price. Closing costs include loan origination fees, title fees, title insurance, notary fees, recording fees, and points (if applicable) among other costs. Sometimes, buyers choose to add the closing costs to their mortgage loan. By doing so, it increases your monthly payment. Plus, you'll be paying interest on top of it. But it does require less money out of pocket when you close. You decide how you want to handle these costs.
Smart buyers always hire a professional to perform a home inspection. This marks another one of the hidden fees you'll find when purchasing a home. A home inspector can identify warning signs of several expensive potential problems. This inspection costs anywhere from $200-$400, depending on the size of the house. You may the home inspector directly for their services. If you forgo a home inspection, you might not spot possible issues that might pop up later.
There are two types of insurance most San Antonio buyers will be responsible for: homeowner's and PMI. These make up the next hidden costs you need to be aware of. Every owner must obtain homeowner's insurance. This typically becomes part of your monthly mortgage payment (along with principal, interest, and property taxes). Shop around to find the best rates. Then, let your bank know who you'd like to use. They'll pay these fees out of your escrow account for you. If you borrow more than 80% of the purchase price to pay for the home (ie, put less than 20% down), you'll be charged for PMI (private mortgage insurance). This covers the bank if you default on the loan. PMI eventually drops off when the bank determines that you own at least 20% of your home. If you believe your property has gone up enough in value to show that you own 20%, you can have it reappraised. Then, show the new home value to the bank.
Don't forget about Uncle Sam. He definitely doesn't forget about you. A large portion of city services (police, fire, road maintenance, etc.) comes from property taxes. Your bank can divide this up into monthly bites for you as part of your overall mortgage payment. They deposit these monthly payments into an escrow account and send off the taxes when they are due. Otherwise, you end up making a huge payment once or twice per year. If you move into your new home and the city re-evaluates it a few months later for more than you paid, you might end up with an additional tax bill to supplement the original property taxes. On the bright side, it also means that your San Antonio house is worth more than you paid for it. Can you say "equity"?
Another one of the hidden costs buyers tend to overlook is the interest rate. Borrowers with a higher credit score receive better interest rates. That means that it costs less to borrow money to purchase your house than a buyer with a lower credit score. Lower interest rates mean lower monthly mortgage payments and thousands of dollars saved over the life of the loan. Make sure your credit is in tip-top shape before you apply for a mortgage loan.
Upfront Escrow Funding
Some expenses must be paid upfront (property taxes, insurance, HOA fees). This covers the expenses for the first year you're in the property. Your monthly mortgage payment should include enough to fund the account thereafter. Many lenders like to add a little cushion into the escrow account to cover unexpected increases in these expenses as well. That could translate to a couple thousand more dollars in hidden costs you might not have been expecting.
When you move, you'll need to set up utilities at your new place. This hidden cost comes in the form of deposits to establish an account. Also, if you move into a larger home, your monthly utilities (electricty, gas, etc.) might go up.
Finally, it costs money to move. Even when you don't hire a professional moving company, it still costs you. You'll need boxes, tape, bubble wrap, and a moving truck. Recruiting friends and family helps reduce your cost. But, if you're making a drastic move (cross-country, for example), it might be best to shell out the extra dough for a professional moving team.
LUX Move Up* by Christine Aldrete Banks, CRS, SRS, RSPS