January 18, 2023
Home Buying
Buying a house is a complex process. Homebuyers consider several factors, such as selling price, mortgage rates, utility prices, and many others, before making the decision. However, many hidden costs may take them by surprise. And the surprise is often expensive!
If you plan to buy a house in Eastvale, CA, here are some hidden costs you should know about and account for in your budget.
The cost of moving to a new house includes lost time, moving fees, and property loss incurred during the move. The transportation alone can cost upwards of $3600, depending on the distance to the final destination, truck size, time of the year, and the moving company you hire.
If you are hiring a moving company, request estimates from at least three full-service vendors. Make sure that the quote you receive includes packaging supplies costs, moving insurance, cost of furniture disassembly and assembly, elevator fee, long carry fees, hosting fees, and pet-carry fees. Finally, you should also take note of the cost of cancellation, delayed delivery, and express delivery.
If you decide to do it yourself, you will still need to pay for the vehicle, storage fee, pet permits, road taxes, and packaging material. It’s a decision that pits time and hassle on one side and money on the other. Save what matters to you most.
When finalizing a deal, homeowners must account for the down payment, closing costs, and earnest money.
Closing Cost
It includes various costs like broker fees, appraisal fees, and title insurance. These costs are substantial and often accumulate into 1% to 2% of the house’s selling price in California, which is among the highest in the United States. Many new homebuyers overlook closing costs while budgeting for a home purchase.
Earnest Money
You may be expected to pay earnest money to prove your intent to buy the house. It can be between 1% and 3% of the purchase price. Eventually, it will go towards the down payment or closing costs. If a bank does not consider you a credible creditor, it may increase the percentage of your earnest money.
PMI or MIP applies to homebuyers who make less than a 20% down payment during a home purchase. Moreover, any loan backed by the Federal Housing Authority (FHA) also requires homeowners to pay for mortgage insurance. This insurance aims to protect the lender against homebuyer defaults on mortgage payments.
The premium for PMI will vary with your credit score. Typically, for every $100,000 borrowed, the PMI premium can range between $30 and $70 per month.
Homebuyers often find a good deal on an old house only to ignore its significant repair and maintenance costs. Sometimes, expensive repairs elude the initial cursory inspections and sneak up on homebuyers at a later time. These include roof repairs, floor renovation, new pipes installation, etc. If you are moving to an older house, double-check the structural issues to avoid any rude surprises later.
Then, there is the cost of decorating. When you move to a new house, you may not have everything to decorate. Seemingly small expenses, such as furniture, paints, curtains, and so on, can quickly add up. So, set aside some funds for decorating the new house to your current taste.
Homeowner’s insurance itself is not a hidden cost. After all, banks require homebuyers to have homeowner’s insurance before they can sanction the loan. Like property taxes, HOI is paid out directly from an escrow account. Homebuyers need to read the fine print and discover any caveats for which they should get extra coverage.
A standard HOI may not cover damages from “acts of God” like hurricanes, floods, and earthquakes. In a state like California, that can be a problem. So, homebuyers should apply for extra coverage to protect their new investment.
The additional coverage can run into hundreds of dollars every year. So, homebuyers should account for the extra coverage while calculating the cost of homeowner’s insurance.
A homeowner’s association or HOA is an entity that oversees the everyday affairs of a residential area. Every HOA has a pre-determined fee structure that covers community facilities, lawn care, snow removal, general maintenance, and more.
Not every home is part of an HOA. But they are extremely common in California. In fact, according to a recent report, there are around 49,200 HOAs in California, the highest for any state in the USA. So, it is highly likely that you will be a part of an HOA and will be paying anywhere between $100 to $200 in HOA fees.
Buying a house is one of the biggest financial decisions you make. It will pay you well to invest your time and effort to research every expense and account for it. Most homeowners only budget for down payments and mortgage payments and ignore everything else.
Don’t make such a rookie mistake.
Read the fine print and break down your expenses to the smallest units. It will help you visualize and budget for the real cost of home ownership. It might get overwhelming at first, but it will serve you well in the future.
Diana Renee
I am so fortunate to have grown up in one of the most wonderful places in the world, California. With friendly people, incredible weather, great entertainment, beaches, mountains and the desert all within driving distance, SoCal has it all. I was born and raised in Long Beach, and have lived in Corona since 1996. I truly love this city and I'm proud to assist my clients in navigating the process of buying and selling real estate.
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