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8 Expenses to Expect When You Purchase Your Home

If you're a first time home buyer, you may not know what to expect when starting the home purchase process.  You may know that it's generally a better financial move to buy a home than rent one.  You may have decided you need additional space.  You may be looking for a relatively stable investment in which to harbor a portion of capital.  You might be buying a home for any of these reasons.

But if you've never done it before, the process can be difficult and stressful.  Don't let this happen to you.  Make sure you're informed before you dive in.  Read up on the following eight expenses that you may have to pay when you purchase your home.

Mortgage Payments

Unless you're one of the privileged few who can afford to purchase their homes all in cash, you'll be making payments against the cost of your home for many years to come.  These payments will be made monthly to the lender who provides you with your mortgage.  The recipient of your monthly payments may change if your loan is sold.  Your mortgage payments will account for the bulk of the money you will spend on your home.

Down Payment

The down payment will comprise a significant portion of the money you spend on your home initially.  You'll need to put down at least 20% of the purchase price if you want to qualify for the best mortgage rates.  Other down payment options exist, too.  You may be able to take out an FHA mortgage with just 3.5% down.

Closing Costs

These can vary depending on the lender you work with.  You probably pay a few thousand dollars here.  These funds will be paid during the closing process, when you're signing your loan documents and making your down payment.

Escrow Fees

When you're making the payments listed above, you'll be required to place the money in an escrow account.  The escrow company will charge a fee for the service of processing the transaction.  This few could be anywhere from a few hundred dollars to a few thousand depending on the dollar amount being held.

Private Mortgage Insurance

If you paid less than 20% of the home price as your down payment, you'll need to pay for private mortgage insurance.  You'll pay monthly premiums until you've gained at least 20% equity in your home.

Homeowner's Insurance

Most lenders will require you to pay for and maintain a homeowner's insurance policy on the home that you've purchased, at least until you've entirely paid off your mortgage.  Policy costs can vary widely.  Do as much research as is required to find the most affordable insurance policy.

Property Taxes

This one goes without saying.  You'll have to pay property taxes on your new home each year.

Home Maintenance

Many experts estimate that you should be prepared to spend at least 1% of the value of your home on home maintenance costs each year.  This can add up to a significant amount over time.  Don't neglect this expense.  Maintaining the value of your property is crucial if you want to protect the money you've invested in the place and create a thriving home for yourself and your family.

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