Let’s say you’re house shopping and come across your dream home. It has a price tag of $200,000. However, this for sale price on the house doesn’t tell the whole story. Almost everything we buy has additional costs, and it’s especially important to know the bottom-line amount when it comes to whether you can afford a home.
If you know all of the costs to expect when relocating to California, you’ll be more prepared for when you find the perfect listing.
Here’s the 7 most common expenses to expect when you purchase a home.
1. Down Payment
This is the biggest hurdle. A down payment is the initial payment that’s made in order to receive a loan.
Ideally you’ll want to put down 20% of the home’s purchase price in order to get the best interest rate possible. Also, a 20% down payment allows you to avoid private mortgage insurance when relocating to California.
If you’re buying a $200,000 home that would result in a down payment of $40,000. Sound scary?
Good news, with most FHA loans, you can get away with putting down as little as 3.5%.
Check out this Down Payment Calculator for more info.
2. Mortgage Payments
This is the amount that you are obliged to pay towards the loan each month. With each payment that you make, you are building equity into your home and getting one step closer towards full ownership.
The principal portion is used to pay off the original loan amount, and the interest is paid to your lending agency.
3. Closing Costs
Closing costs are the fees paid at the closing of a real estate transaction. This is when the property is transferred from the seller to the buyer.
Closing costs include things like these:
- Mortgage application fees
- Inspection fee
- Appraisal fee
- Home warranty
- Property taxes
- Property insurance
- Escrow fees
These costs vary depending on your situation, so it’s best to talk to your lending agency about specifics when relocating to California.
4. Private Mortgage Insurance
Insurance offers protection. Private mortgage insurance, also known as PMI, is a type of mortgage insurance that is used with conventional loans. In this case, PMI protects you and the lender if you’re unable to make your payments on your home loan.
PMI is only needed if your down payment is less than 20%. If you’re eager to buy a house, but you can’t afford a large down payment, PMI will allow you to still receive a loan. And good news – once you’ve built your home equity up to 20%, the insurance will fall off your monthly payment.
5. Homeowner’s Insurance
Homeowner’s insurance is a form of property insurance that protects you against damages to the house itself, plus any possessions inside the home as well. It even covers liability for accidents that may happen on your property.
You can legally own a home without it, but most agencies will recommend it to cover your home in case of damage caused by unforeseen circumstances, such as fires or natural disasters.
As a very broad estimate, expect to homeowner’s insurance to be $35 for every $100,000 of home value.
6. Property Taxes
Property taxes are another expense you’ll need to take care of as a homeowner, which is one reason why your home is required to have an appraisal.
These taxes vary based off of the value of your home. They are collected by the state and federal governments to pay for education, emergency services, transportation, libraries and parks.
For a more detailed calculation of property taxes, check out this resource.
7. Home Maintenance
Lastly, remember to keep your home in optimal condition. This step is easy to forget, but keep in mind that one day you’ll be the seller looking for a maximum return on your investment.
Keep it sharp with regular maintenance.
In most cases, buying a home comes down to one thing. Affordability.
Read more here to find out what you need (or don’t need) to afford a home for sale in Redding, CA.
The views, articles, postings and other information listed on this website are personal and do not necessarily represent the opinion or the position of American Pacific Mortgage Corporation.
* For loan examples and more information visit our disclosure page at https://www.uslendingcompany.com/disclosures/