Buying a home is expensive. For most of us, it’s the largest financial transaction of our lives. While most people understand the major financial components of buying a home – for example, purchase price and some closing costs – there are still more expenses that remain “hidden.” So to help you go into the process forearmed with knowledge, here are 6 hidden costs to plan for when buying a home in Santa Cruz.
1. Insurance and Property Taxes
You know you’ll have to make a monthly mortgage payment, but that payment is likely to include more and be larger than you may have anticipated. A monthly mortgage calculator will tell you only what your principal and interest payment will be each month. But the payment will usually also include property taxes and home insurance, and those can add quite a bit to the monthly payment. Your real estate agent can help you gain a good understanding of these hidden expenses when buying a home in Santa Cruz to learn more.)
2. Mortgage Insurance
You may be in for another surprise if your down payment is less than 20% of the purchase price. If it is, then you will likely have to pay for mortgage insurance – because, in this case, lenders consider you a bigger risk. Mortgage insurance usually runs about .05% to 1% of the cost of your loan, which you will be paying every month with the mortgage payment.
3. Closing Costs
Yes, we all know about closing costs when buying a home in [market city], but what many people don’t realize is how many costs are included and how high the total can be. Generally, closing costs run about 2% to 5% of the purchase price. That means, for example, that you can expect to pay $4,000-$10,000 in closing costs for a $200,000 home. The real surprise, though, for buying a home in Santa Cruz lies in the huge number of things included in the closing costs, for example:
- Lender fees
- Title fees
- Attorney fees
- Escrow fees
- Prorated interest
4. Maintenance and Repairs
One of the deeply hidden costs when buying a home in Santa Cruz is the expense of covering emergency repairs and/or maintenance soon after the sale. No matter how thorough the inspection, major things can and do go wrong. So you need to plan for expenses like replacing the air conditioning unit when it gives out in the middle of July.
5. Emergency Funds
Another hidden cost is your need to have an emergency fund for things that go wrong during the purchase process. Any number of things can happen during the process, and the solution is usually an infusion of more cash. Say the appraisal comes in just a hair too low, and, as a result, your lender’s loan-t0-value requirements aren’t met. In that case, you’ll probably have to come up with a larger down payment in order to get a mortgage and buy that home you really want.
6. Moving Costs
You know you’ll have to pay a moving company to load, transport, and unload at least your larger possessions like furniture and appliances. That expense can run hundreds, maybe even thousands, of dollars. But that is far from all your moving costs. You’ll also have to figure in all the smaller supplies and necessities that can add up, such as boxes, packing materials, tape, labels, cleaning supplies, and eating out. The total cost can surprise you.
How to Deal with Hidden Costs
The best way to be prepared for these hidden costs when buying a home in Santa Cruz is to use a qualified, local real estate agent. A good agent can assist you in avoiding some of the costs and in finding ways to meet the others. Really, there are just too many contingencies for someone to try it on their own.