Buying a home comes with costs, but a lot of people aren’t clear on what those expenses really are. It’s important for you to understand the home buying costs that you’ll need to pay, so you know what to expect from the experience. Not all homes are the same, and not all lenders are exactly alike, but the vast majority of costs that come with buying a home are going to be the same no matter where you’re buying and what lender you’re using. The more you dispel the myths about home buying costs, the better you’ll feel about your own journey to home ownership.
1). Is buying always cheaper than renting?
One common myth is that it’s always cheaper to buy than to rent. Buying is a good choice for a lot of people, but sometimes renting is the right option. There are closing costs, taxes, insurance, and ongoing maintenance costs that come with buying a home. Renters don’t have those, which can make that choice cheaper in some circumstances. Of course, buying also means the opportunity to build up equity, which isn’t something that renters get the chance to do. Only you can decide if the costs of home buying (and ownership) are worth the equity opportunities.
2). Do you have to pay your agent?
As you look into buying a home, you’ll be working with an agent. Most people assume that you will need to pay that agent, but that’s not necessarily true. Some do charge for working as a buyer’s agent, while many do not. They make their money from the commission they receive from the seller, so you don’t have to pay them anything. Read the contract you’re offered, and make sure there aren’t any conditions or fees in there that you don’t feel good about. If you find something troublesome, negotiate or choose to work with a different agent. Until you sign a contract, you have options.
3). Won’t the seller pay your closing costs?
You can ask the seller to pay your closing costs, or to give you money toward them, but the seller can refuse. There are also some closing costs that the buyer must pay, so you won’t avoid them completely. Still, with a motivated seller you could get most of your closing costs paid, which means that you will have lower home buying costs than you otherwise would have. In some areas of the country where closing costs are high, this can make a significant difference for the buyer of the house.
4). Can you spend less if you don’t get a mortgage?
While getting a mortgage is pretty standard, some people do pay cash for their homes. If you don’t get a mortgage you can save a lot, because you’re not having to pay interest charges. You can also save on the home buying costs, since lenders charge an origination fee when they create a mortgage for you. That fee could be a few hundred dollars, or it could be well over $1,000. It depends on the lender and the amount of the mortgage you’re getting, among other factors. You may not have a choice as to whether you get a mortgage, but doing so will add to the home buying costs you’ll have.
5). Do all lenders charge the same fees?
Not all lenders are created equally. Some of them simply charge more for their services than others, and that’s important to pay attention to. If you want to reduce your home buying costs, it pays to shop around. Talk to several different lenders and see what they will offer you. Ask about the interest rate you’ll have to pay, along with the fees and charges. In the end you’ll need to choose the lender you feel best about, but you should know about the charges that come with that choice.
6). Can you pay your own taxes and insurance?
A lot of people are concerned about home buying because they worry about the cost of adding taxes and insurance to their mortgage. It makes their monthly payment higher. In most cases, though, you can’t pay them separately. The lender has a vested interest in making sure that the property is insured and the taxes are kept up. By paying them with your mortgage they go into escrow and the lender actually pays them to the companies and governments that collect them. Then the lender can be sure those items have been paid, reducing their risk that you’ll default on those things and cause problems for the lender.
7). Does buying in a down market really mean big savings?
Don’t get caught up in all the myths that surround the costs of home buying, as you might find it more affordable than you think. If you really want to make it as affordable as possible, buy in a very down market. Not only can you save a lot of money on the price of the house, but lenders who need business may be offering breaks on fees and other costs. That can reduce your home buying costs considerably in some cases, and there’s no reason to spend more than you need to when you’re buying a home. If you plan accordingly, you can get into a great home for the right price and avoid spending anything extra on inflated costs that only drive up the lender’s profit.
2 Point Highlight
Buying a home comes with costs, but a lot of people aren’t clear on what those expenses really are.
Don’t get caught up in all the myths that surround the costs of home buying, as you might find it more affordable than you think.
