The keys to homeownership don’t come cheap

The number one mistake most buyers make is underestimating the cost of homeownership. You may be able to afford a mortgage, but that doesn’t mean you can afford to be a homeowner. There are tons of other expenses, outside of mortgage payments, including taxes, insurance, maintenance, and periodic home repairs. Being a homeowner can be very expensive and a bit overwhelming at first, but it is still the most important investment most people will make. The housing market can teeter from good to bad, as we’ve seen with the recent housing crisis, but home values tend to go up building significant equity over time. In fact, according to Lending Tree, home prices in the U.S. rose by three to six percent annually during the past couple of decades. In many cases, owning a home is how most families build wealth. In honor of National Homeownership Month and the many incentives to buying, consider taking your piece of the American Dream and become a homeowner. Before making the leap into homeownership, it’s important to do your homework – make sure you can afford the cost of owning a home and make sure you understand the true cost of buying a home. The following are a few ‘hidden’ costs to regard when buying:

Title insurance – the fee that’s charged at closing that protects your investment in the event that the previous owner did not actually own the home that was sold to you. This fee is based on the value of the home.

Legal fees – is not required, but is often recommended because buying a home can be a complicated legal transaction. Home transactions typically use boilerplate forms for everything. If so, the legal review may not be required.

Private mortgage insurance – is charged when the house is being purchased with less than 20 percent down. If you have a loan that requires it, count on paying a couple month's premiums in advance.

Notary fee – is charged at closing and is required to swear that you are who you say you are. This could cost around $50.

Lender/broker fee – this fee is charged by lenders and brokers to prepare purchase documents. This fee could cost between $600 to $1000.

Appraisal fee – this fee is charged to determine fair market value and cost $250 on average.

Survey fee – is the fee that’s charged to determine the exact boundaries of the property. You won't need to pay for this fee if an existing survey can be used. On average this could cost $150 to $400.

In addition to closing cost and other fees required to get the keys to your new home, don’t forget the hidden cost to actually live in the home. Moving expenses, utility deposits, pest control, paint and new carpet are all additional cost to consider when buying a home. For more information on buying and owning a home, visit www.hud.gov.

Tanisha (Warner) Smith is a former communications manager at MMI.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.