Buying a home in Colorado is the biggest purchase you will make in your lifetime. In addition to putting earnest money down, there are some other costs when purchasing a home that can catch you off guard if you're not expecting them.
While you're busy saving for your down payment, here are some other financial considerations to keep in mind to stay within your budget.
When you've decided on your dream home and an offer has been made, you'll pay earnest money to the seller up front once the offer has been approved. This amount is roughly between 1% - 3% of the home purchase price and is separate from the down payment.
This deposit shows the seller that you're serious about your plans to purchase the property. At closing, earnest money is applied to the settlement statement (cost of home purchase) and is a credit to your closing costs.
When you use down payment assistance programs, we can sometimes negotiate your earnest money down to as little as $1000.
Your general home inspection is just the beginning of the transaction process. This measure allows for the buyer to be made aware of any issues that may bring about unanticipated repairment costs.
It is highly recommended to test for radon and have the sewer scoped, each of which will cost an extra $100-$150. If the inspector discovers red flags regarding cracks or mold, it is also a good idea to have a structural engineer or mold specialist inspect the property.
Another thing to consider is that while you may be able to negotiate some repairs or a credit from the seller to address issues found at inspection, your inspector will likely uncover a handful of minor fixes and ongoing maintenance items that you should be prepared to take on yourself.
Planning ahead for extra inspections and home maintenance is well worth the added peace of mind.
If you are financing any part of the home, your lender will require an appraisal to be sure the value is on par with what you're borrowing. This may be an out-of-pocket expense paid to the lender and varies by property, but typically is in the range of $400-$600.
When buying an attached property or a property in a managed or amenity-based community, you will have to consider the impact of the HOA fees on your buying power. Additionally, some HOAs may require upfront deposits and private transfer fees.
While these are negotiable with the seller at the time of the contract, it's a good idea to set aside money for these hidden costs. You'll also want to pay attention to what the HOA fees cover. If they include roof and building insurance, you can save money on your homeowner's insurance policy (a hidden bonus).
Don't worry if you are unable to put 20% down on your new home. Chances are, you can still qualify for a loan and Colorado down payment assistance, but will likely have to pay Private Mortgage Insurance. This policy is rolled into your total mortgage payment and protects the lender if you become unable to make your payments.
Payments can vary and range anywhere 0.1% - 2% of the original loan amount per year. Once you reach 20% home equity either through making mortgage payments or by accruing equity through the real estate appreciation you can remove your PMI by contacting our experienced team of lenders.
When buying a home in Colorado, Seller's closing costs have to do with agent commissions and Buyer's closing costs have to do with their loan.
You will need to pay your down payment, lender's origination fees, upfront fees for your homeowner's insurance policy, deed recording fees, transaction closing fee, insurance and property tax escrow, and any negotiated fees from the contract, including loan discount fees.
In some cases, monies due at closing include an upfront HOA payment or deposit, loan discount fees, or a bill of sale for items purchased from the seller. While costs can vary greatly, you should budget anywhere from 3% - 5% of the mortgage amount.
Don't forget the cost of moving when setting aside money to buy a home. Even if you have some helping hands, the cost of boxes, packing tape, cleaners, and a moving truck adds up quickly.
You may also need to supplement your furniture collection to fill your new space and purchase additional household items to get you started. To keep these costs from sneaking up on you, roll them into your home buying budget.
Buying a home is both exciting and stressful. Be extra savvy by anticipating the unexpected hidden costs of buying a home to thwart unpleasant surprises down the road. Sit down with our team of experts to review all of the potential costs you should anticipate.
Ready to make a house your home? Smart Start First Time Home Buyers are experts with first time home buyers and all down payment assistance programs. We are with you every step of the way. Find out more now.
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