A home is an important purchase. Potentially the most important and most expensive purchase you’ll ever make. So before diving headfirst into the real estate market, you just might want to consider potential complications and fees, and how to reduce or avoid them.
Costs of buying a home
The greatest and most common costs associated with buying a home are extend well beyond your monthly mortgage payments. It is also necessary to pay property tax and purchase homeowner’s insurance. In addition to taxes and insurance, you will be paying closing costs, any attorney or other legal fees and, potentially, private mortgage insurance if you were unable to put down a twenty percent down payment up front. These costs are all widely variable but they can certainly add up, so take care to factor them into your budget when selecting a home.
Do I need to hire an attorney?
The money you save by avoiding missteps, gaffs or traps in the home buying process usually makes hiring an attorney well worth the legal fees you pay. Not only can in be expensive, but you can get into some very sticky legal problems if you’re unclear on laws, processes and legal jargon of the real estate world. When choosing a real estate lawyer, make sure he or she is licensed and experienced in residential real estate law.
You don’t need an attorney to hold your hand throughout the entire process, but there are a few key details of this process with which you will most likely need legal assistance from a profession. An attorney should review all important documents involved with the purchase of your home including your mortgage loan papers, the house title, the title insurance policy, bills of sale and, of course, the deed to the house. Your attorney should also look over your purchase contract before you agree to it and contact the seller’s attorney to make arrangements for the closing. It is also important to have your own legal representation present at the closing to deal with last minute negotiations, problems or changes to the purchase agreement.
Reducing extraneous costs
If this is your first home buying experience, it is strongly recommended that you hire an attorney who is versed in real estate law to assist in the home purchase process.
One way to reduce costs is to cut down on the number of hours for which your legal representation is billing you. As much as possible, do research ahead of time, talk to people who have navigated the home purchase process before you, print and fill out forms you know you’ll need and try to answer your questions or concerns first before paying someone to answer them for you.
Another effective way of reducing home buying costs is to cut the cost of the homeowner’s insurance you’re paying on the property. Simply comparing rates of many different insurance providers and talking with other homeowners can yield cheaper premiums than you were previously paying. Consider also, increasing the deductible on your insurance policy. Increasing your deductible, of course, means decreasing your monthly premiums. Improving the durability and security of your home by taking steps like renovating with more durable materials, fixing any problems with safety code compliance, installing smoke detectors and fitting your home with a burglar alarm, will also reduce your premiums. Using the same insurer for all your insurance policies, and remaining loyal to your provider, is another way to reduce your premiums. Many insurance providers offer price reductions when you take out two or more policies with them, and stay with them for a number of years.
A note about tax-deductible home selling costs:
While property taxes and interest are deductible each year, other expenses involved with the purchase of a home are not instantly tax-deductible. Costs such as closing costs, loan application fees, service fees, settlement fees, legal fees, and title insurance can, however, be taken into account in the adjusted cost of your home when you’re selling, thus adjusting your tax deductions.