Buying a home is an exciting step, but many buyers focus only on the down payment and mortgage without realizing there are other costs involved. These extra expenses can add up quickly, and if you’re not prepared, they can strain your budget. Knowing about them ahead of time can help you plan better and avoid surprises.
Purchasing a home comes with more than just the price you see on the listing. In addition to your down payment and monthly mortgage, there are several expenses buyers often overlook. If you’re planning to buy a home in Albuquerque, you need to account for these hidden costs so you’re financially ready for homeownership. This guide explains the following:
- Home inspection and appraisal fees
- Closing costs
- Property taxes
- Homeowners insurance
- Ongoing maintenance and repairs
Here’s a closer look at each.
Home Inspection and Appraisal Fees
Before finalizing your home purchase, you’ll need to pay for a home inspection and an appraisal. Both are essential, but they come with upfront costs that buyers don’t always anticipate.
A home inspection is a detailed evaluation of the property’s condition. A professional inspector will check the foundation, roof, plumbing, electrical systems, HVAC, and more. The goal is to uncover any hidden issues before you buy, so you don’t end up with unexpected repair bills later. While a home inspection isn’t legally required, skipping it can be risky. Depending on the home’s size and location, an inspection can cost anywhere from $300 to $600. If the inspector finds serious issues, you may need to pay for additional inspections, like checking for mold or a structural evaluation, which can cost even more.
An appraisal, on the other hand, is required by lenders to determine the home’s fair market value. This ensures the property is worth the amount you’re borrowing. If the appraisal comes in lower than your offer price, you might have to renegotiate with the seller or cover the difference out of pocket. Appraisal fees typically range from $400 to $700, depending on the property and location.
These two costs are non-refundable, even if the deal falls through, so you need to budget for them early in the homebuying process.
Closing Costs
Closing costs are one of the biggest hidden expenses in a home purchase. These fees cover the administrative and legal work required to finalize the sale, and they’re typically 2% to 5% of the home’s purchase price. Many buyers don’t factor in this expense until they get close to closing, which can lead to financial stress.
Closing costs include lender fees, title insurance, escrow fees, attorney fees, prepaid property taxes, and homeowners insurance. Some of the most expensive charges come from the loan itself, such as the origination fee, which is what lenders charge to process your mortgage. There are also title search and recording fees, which ensure the home’s title is clear and legally transferred to you.
If you’re buying in a competitive market, you might be able to negotiate with the seller to cover some of your closing costs. This is known as a seller concession, and while it’s not always an option, it can save you thousands of dollars. You can also ask your lender about rolling closing costs into your mortgage, but keep in mind that doing so will increase your loan amount and monthly payments.
Property Taxes
Property taxes are an ongoing cost that many first-time buyers underestimate. The amount you pay is based on your home’s assessed value and the local tax rate, which varies depending on where you live. In Albuquerque, property tax rates are relatively low compared to other major cities, but they still add up over time.
Your lender may include property taxes in your monthly mortgage payment, holding the funds in an escrow account and paying the tax bill on your behalf. If your taxes are included in your mortgage, you might not notice the cost right away, but it’s still an important factor in your overall budget.
Keep in mind that property taxes can increase over time as home values rise. If your area reassesses property values or passes new tax measures, your bill could go up. It’s a good idea to check with your local tax assessor’s office to estimate what you’ll owe each year and whether any tax exemptions apply to you.
Homeowners Insurance
Homeowners insurance is another cost that’s often overlooked when buyers set their budget. Most lenders require you to have a policy before they’ll approve your mortgage, and even if it weren’t required, you’d still want coverage to protect your investment.
The cost of homeowners insurance depends on several factors, including the home’s location, age, condition, and the amount of coverage you choose. In Albuquerque, insurance rates can vary depending on the risk of natural disasters like wildfires or flooding. The average cost of homeowners insurance in New Mexico is about $1,500 per year, but your premium could be higher or lower depending on your home and the coverage you select.
It’s important to shop around and compare quotes from multiple insurance providers. You can also ask about bundling discounts if you already have auto or life insurance with a company. Some lenders allow you to pay your insurance premium as part of your monthly mortgage payment, while others require you to pay the full annual premium upfront at closing. Be sure to clarify what’s expected so you don’t run into unexpected costs.
Ongoing Maintenance and Repairs
One of the biggest differences between renting and owning is that when something breaks, you’re responsible for fixing it. Even if you buy a brand-new home, you’ll need to budget for regular maintenance and occasional repairs.
Routine upkeep includes things like HVAC servicing, gutter cleaning, landscaping, and pest control. These small costs can add up over time, but they help prevent bigger, more expensive problems down the road. On average, homeowners spend 1% to 3% of their home’s value on maintenance each year, though older homes or homes with large yards may require more.
Repairs are often unpredictable. A broken water heater, roof damage, or electrical issues can cost thousands of dollars to fix. It’s a good idea to set aside an emergency fund specifically for home repairs so you’re not caught off guard by unexpected expenses. Some homeowners also purchase a home warranty, which can help cover the cost of repairs on major appliances and systems, but these policies come with their own costs and limitations.
Owning a home is a rewarding experience, but it comes with financial responsibilities beyond just your mortgage. By preparing for these hidden costs, you’ll be in a better position to make smart financial decisions and enjoy your new home without unnecessary stress.
FAQ About Hidden Costs of Buying a Home
Check out these commonly asked questions about the hidden costs of buying a home. If you don’t see your question here, please call our office and we’ll find you the answers you need.
Can I Negotiate Closing Costs With the Seller?
Yes, in some cases, sellers may agree to cover part of your closing costs, especially in a buyer’s market. This is called a seller concession, and your real estate agent can help negotiate this for you.
How Can I Lower My Homeowners Insurance Costs?
You can lower your premium by shopping around for quotes, bundling policies, increasing your deductible, or installing safety features like smoke detectors and security systems.
What Happens if My Home Inspection Finds Major Issues?
If the inspection uncovers serious problems, you can ask the seller to make repairs, request a price reduction, or back out of the deal if your contract includes an inspection contingency.
Are Property Taxes the Same Every Year?
Not always. Property taxes can increase if your home’s assessed value rises or if local tax rates change. Some areas also reassess home values periodically.
Is a Home Warranty Worth It?
A home warranty can help cover repairs for major appliances and systems, but policies vary. Read the terms carefully to understand what’s included and what’s not.
Ready to Talk to an Albuquerque Real Estate Expert?
Call Myers & Myers Real Estate at 505-401-7500 or fill out this form to talk about buying or selling your home in Albuquerque or the surrounding areas. In the meantime, explore:
- Albuquerque homes for sale
- Rio Rancho homes for sale
- Corrales homes for sale
- East Mountains homes for sale
- Valencia County homes for sale
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