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Buying a home is a huge decision for everyone. It gives you the ability to settle down permanently without monthly rental payments. The money you pay is an investment in your future, not in your present. However, at First Savings Mortgage of D.C., we often see and hear of people choosing to rent because they feel that the "hidden costs" of home buying will be more than they can handle. For this reason, we are shedding light on the mysterious question of, "What are the hidden costs of buying a home in DC?" The truth may surprise you.
Are There Hidden Costs when Buying a Home?
The truth is, there are no truly hidden costs in buying a home in DC. However, it is important that you understand, no one can buy a home with only a down payment, which takes a lot of first-time homebuyers by surprise. This is where the confusion kicks in.
With any property closing, there are costs that have to be dealt with. These closing costs are something you should be prepared for in advance if you want things to go smoothly. These costs may include
- Broker/Lender Fees
- Escrow Costs
- Appraisal Fees
- Inspection Fees
- Application Processing Fees
- Title Fees
- Attorney/Legal Fees
- Property Taxes or Other Prepaid Costs
In some situations, you may also need to pay for other fees before, during, or soon after the closing of a property. Some examples of fees that may sneak into your closing costs include:
- Credit Report Fees. A credit report could cost you money, but in some situations, it may be covered by the person requesting your credit.
- HOA. If you are choosing to buy a condo or a home with an HOA fee, you will need to pay for it.
- Home Insurance. If part of your mortgage agreement is that you need to have homeowner's insurance, you will also need to take that cost into consideration.
How Much Should You Expect to Pay When Buying a Home in DC?
There is no definite, one size fits all answer to this question. Your closing costs will vary depending on where your new home is located and more. However, according to The Washington Post, some people have had to pay as much as $20,000 in closing costs with a majority of that coming from transfer taxes. These taxes are imposed by the local government.
With that being said, there are ways that you can go about lessening the overall damage of a closing cost. The U.S. News states that you are not likely to avoid all closing costs. Some simply cannot be changed and both the buyer and the seller will have fees that are inescapable. You can lower your expenses sometimes by taking advantage of "Lender-Paid or Seller-Paid Closing Costs".
It can also help to take the sting out of the fees if you know that come tax time, you may be able to qualify for certain tax deductions. According to Credit Karma, if the purchased home is currently your primary residence, you may get money back for purchasing it. This includes collecting taxes back for interest paid at the time of your home purchase and any real estate taxes that you had to pay at closing. Some mortgage insurance premiums may also be tax-deductible.
Can You Afford a New Home?
No one ever said that home buying or home ownership was easy. However, people with little to no credit can have their dream home with a little help and careful planning. The thing you need to remember is that most of the home buying process isn't something you can just dive into. First Savings Mortgage can help you in your home buying process.
You should contact your local Loan Officer, so they can help you decide how much you can afford to spend. They will also work with you to help you come up with a plan that will ensure your dream of homeownership becomes a reality.