A”For Sale” sign rests merrily in the front yard of the perfect, two-story Victorian house on the corner, the one you’ve had your eyes on for ages. You can imagine living there and watching your children play in the spacious yard that is fenced. Now you screech to a halt, catch a colorful flier, and start to dial the real estate broker’s amount on your cell phone. However before you do, there. The cost of purchasing a house is a whole lot greater than the asking price.
Asking Price vs. Selling Price
The cost listed on the house’s flier or real estate broker’s site is its asking price, the amount the sellers hope to lure a buyer into paying for their property. The asking price might be based on a number of variables, including the selling prices of other comparable houses in the area, the home’s assessed value, or just the seller’s individual belief in the worth of the property. This amount might be inflated and overestimate the home’s true market value, or it may be undervalued in an attempt to quickly sell the property. The sale price is the price the buyer pays for a property after all discussions are complete. It might be just like the asking price, or it might be lower. The aforementioned home’s asking price is $225,000. You create an offer for $215,000, and the seller accepts your bid. 215,000 is the home price.
Down Payment
Another aspect to take into account before calling the actual estate agent is how much money you’ve saved to cover your down payment. The higher your down payment, the lower your monthly interest rate is going to be on your mortgage payment. According to MSN money, a down payment is 20 percent of the selling price of the home. On a $215,000 house, a 20 percent down payment will be $43,000. Lenders may be willing to offer you a mortgage with a far lower down payment, but your monthly payment will probably likely be significantly greater. So far, your dream house has drained your bank accounts of $43,000 in out-of-pocket expenses.
Closing Prices
The entire cost of purchasing a house is greater than the sale price, however. The home-buying process includes an add-on known as closing costs. Closing costs cover various expenses, such as government filing charges, property broker fees or commissions, loan fees, title and closing fees, prepaids the lender needs to be paid beforehand (flood insurance, hazard insurance premiums, mortgage insurance premiums, etc.), and escrows, impounds, and/or reservations. Survey fees and inspection fees might also be included in the final costs. As stated by the Money Alert site, closing costs average 2 to 4% of the house’s selling price. Therefore, if you stumble upon a spectacular mortgage lender that requires zero down payment, then the final costs in your $215,000 house are $8,600. Should you put 20 percent down, you can lower your house mortgage amount to $172,000 and your final costs will probably be $6,880. Some mortgage lenders will allow this to roll into the mortgage, while others will need it be paid out of pocket. If you paid a traditional down payment, you are currently out $49,880 ($43,000+$6,880). This is before monthly obligations.
Monthly Payments
The monthly payment is what most people compute when considering whether they can afford to purchase a house. As you’ve seen, it isn’t the only element. But, it is crucial. The rate of interest you obtain largely affects your monthly payment. According to MortgageCalculator.org, the monthly payment on a $172,000 house loan (after down payment) at a 6.5 percent interest rate is $1,337.99. If your interest rate is 7.5 percent, your monthly mortgage payment will probably be $1,453.88. If you get a loan at 5.5 percent, you’ll pay $1,227.43. Let’s say that you acquire a 6.5 percent interest rate and pay $1,337.99 monthly. Within a 12-month period, this amounts to $16,055.88. According to MortgageCalculator.org, you’ll pay a total of $481,676.52 over the 30-year lifetime of the mortgage. Of that, $229,051.52 will go toward interest . You’ll have paid more than your home’s selling price in interest.
Unusual Costs of Purchasing a House
The costs of purchasing a house don’t end with the down payment and monthly mortgage obligations. There are numerous other recurring expenses. Home owner’s institutions charge monthly or yearly fees, and they may be prohibitively expensive. Let’s say that the Victorian fantasy house is located in a community with a $50 monthly homeowner’s association fee. Your monthly payments are now $1387.99. Homeowner’s insurance, yard maintenance prices, home utilities and warranties also add to the bill. Should you pay $100 a month in homeowner’s insurance, $50 for yard upkeep, $50 for a house warranty and $300 for utilities, you’re currently paying $1787.99 a month, and of course daily living expenses. Keep in mind property taxes as well as other county or city fees that might be due yearly. There are many things to keep in mind when considering buying a house. You have to think about the true cost of purchasing a house before signing the papers, however appealing the house may be. You don’t want to get stuck using a house that you can’t really afford.
