If you are preparing to buy your first home in Atlanta, congratulations! Owning a home here can be a very rewarding experience, not to mention a great investment. However, one very common mistake first-timers make is underestimating how much it will cost to buy, and essentially own, a home. Mortgage calculators don’t give you nearly enough information. As a result, many homebuyers either wind up disappointed when their loan doesn’t go through, or burdened by the unexpected expenses.
That said, there is no need to be disillusioned or dissuaded from buying a home; you simply need to go into the process well-informed and with your eyes open. We have identified at least 12 possible hidden costs associated with buying a home in Atlanta. Some of these are one-time costs while others will be ongoing. By anticipating these costs, your experience as a new homeowner should go much easier. To simplify, we’ve grouped these costs as one-time expenses and ongoing expenses.
One-time expenses
Here are a few of the more common one-time expenses first-time buyers often overlook.
Inspections
Once you have made the offer and gone under contract, it’s your responsibility to pay for a professional home inspection so you can be aware of any/all issues with the home, including any possible game-changers. Technically, you can skip this step and take your chances, but some mortgage companies won’t give you the loan without an inspection because they don’t want to assume the risk. The cost of an inspection varies by the inspector and by the square footage of the home, but you can plan on spending at least $300-$400.
Closing Costs
Many first-time buyers either underestimate the costs of closing on a home or fail to realize these costs are their responsibility (you can sometimes negotiate with the owner on payment of these costs, but that is not a guarantee). Closing costs generally include title insurance, attorney fees, loan processing fees, various taxes, appraisals, etc. These costs can add up to between 2 and 5 percent of your purchase price.
Renovations
Sometimes a home isn’t “move-in” ready, at least as far as you are concerned. If the house needs major repairs, or if you insist on new carpet or new paint before moving in, you may either have to negotiate these costs with the seller or take care of them yourself.
Prorated taxes
The buyer is sometimes required to pay a prorated amount of property tax based on the last time tax payments were collected. Frequently, these are worked into the closing costs, but it’s smart to remain aware.
Prepaid insurance
Depending on how your insurance is structured, you may have to pre-pay your homeowners insurance and/or your mortgage insurance up to a certain amount. Again, you may have these expenses included in your closing costs, but be aware of them.
Deposits on utilities
Sometimes utility companies require a deposit for a set-up service at your new home. This cost is usually minimal compared to other expenses, but when every dollar counts — it counts.
Moving expenses
You might be surprised at how many first-time buyers forget to budget for the cost of actually moving into their new home! This cost depends on many factors, including how much stuff you have, how far you are traveling and whether you hire professionals. You also have to factor in the costs of any new furniture you may want to buy to outfit your new home.
Ongoing expenses
Zillow estimates that the average homeowner spends about $9,000 per year in ongoing costs for owning a home in addition to mortgage payments! Let’s break some of these possible costs down for you.
HOA fees
If your neighborhood has a homeowner’s association, you will probably have to pay dues to that association for upkeep and various expenses for the subdivision itself.
Private Mortgage Insurance (PMI)
If you paid less than a 20 percent down payment (as many first-time buyers do), you will be required to carry mortgage insurance to protect the bank’s interests in the home in case you default. Plan on about $85/month, per $100,000 of your loan, worked into your monthly payment.
Homeowners Insurance
Homeowners insurance generally runs about $35/month per $100,000 of your home’s value, usually worked into your monthly payment. If you live in a high-risk zone, like a flood plain, the cost may be higher.
Property taxes
Your property taxes will vary based on which city or county your home is located in, but generally speaking, you can plan on paying at least $100/month per $100,000 of your home value.
Maintenance
When you rent, your landlord is usually responsible for repairs and upkeep; when you own, you become responsible for those repairs. Many first-time buyers forget about this until the first time the dishwasher breaks and there is no one to call about it. The average homeowner spends roughly $3,500/year on maintenance, but this figure can vary widely based on factors like the age and size of the home.
Hopefully being armed with this information will help you be better prepared financially when you decide to buy a home. When you are ready to see the great properties Atlanta has to offer, call Atlanta Fine Homes Sotheby’s International Realty at 404.948.4812.