Every new and soon-to-be homeowner knows about the primary costs of a new home: there’s the mortgage, the down payment, and monthly fees. However, you might be less familiar with the less-buzzed-about costs that new homeowners face: earnest fees, inspection, title search, and more.
Presented in the order of when you’ll be asked to pay, here are 5 upfront homeowner fees to prepare for:
1) Earnest Money
Once your offer on a home is accepted, it’s customary to wire a sum of money to the seller to show that you’re serious about closing on the property. This amount of money might be called “earnest money” or a “good faith deposit;” either way, you might be asked to wire this money within three days of your offer being accepted.
Don’t worry: this money isn’t just going into someone’s pocket. Once your deal goes through, your earnest money amount is typically deducted from the total amount of your down payment.
Estimated Cost: About 1% of your home’s offer price.
2) Home Inspection
Before closing on your soon-to-be new home, most realtors recommend you hire a certified home inspector.
Home inspectors are quality experts, able to accurately locate any signs of damage or danger in your new home’s foundation, roof, appliances, and systems. In addition to saving you from purchasing an overpriced lemon of a home, home inspectors can help you size up the cost of any repairs or replacements that might need to be made on your home after purchase.
Estimated Cost: Typically $300–$600.
3) Title Search and Title Insurance
After closing on your new home (congrats!), you’ll have to pay fees to your state government for checking, processing, and administering the title of the property to your name.
In addition to switching the title to your name (or to whoever legally owns the home), you're paying to have the title’s records searched. Government workers will check the title’s history to ensure the property can be lawfully transferred to your name.
Estimated Cost: Anywhere from $300–$2,500, depending on the complexity of the search.
4) Prepaid Taxes and Insurance
Once you’re settled into your new home, you’ll have to pay property taxes and homeowner’s insurance on a monthly basis. However—after the initial purchase of your home—most banks and agencies will ask you to pay anywhere from 6 months to a year’s worth of taxes and insurance.
Estimated Cost: The amount you pay will vary quite a bit, depending on the bi-yearly cost of your home’s property taxes and homeowner’s insurance.
5) Home Warranty
Whether you’ve filled your home with brand-new appliances or retained the old ones from the home’s previous owners, you should consider buying a home warranty.
A home warranty is a contract that protects your home’s appliances and systems from wear and tear. If a covered refrigerator, HVAC system, electric system, oven, or other item breaks down, your home warranty company will pay to either fix or replace it.
Estimated Cost: Most home warranty companies will charge monthly premiums, which cost an average of $40/month.
Find the Perfect Home Warranty
Although homeowner fees seem to stack and stack, few of them can put money back in your pocket like a home warranty. Home warranty owners can save thousands in the event of a costly breakdown: HVAC, electrical, or otherwise.
Interested in a home warranty for your home? Save yourself from searching and start with our list of the best home warranty companies out there.
