Homebuying Horror Story #6: Overlooked Costs
At Clear Title, we help people make one of the biggest financial decisions in their life: purchasing a home. The closing process can be complex and challenging, so we have developed this Homebuying Horror Story Series to bring to light some of the situations that can arise during this process. Last month we covered home inspection revelations; this month we are focusing on some of the extra costs associated with homebuying.
Fictional Situation: Steve
- Single male, age 25
- Renting an apartment
- Making $39,000/year
- Monthly car payment
For years Steve had been saving money for a down payment on a house. After finding a condominium he could afford, he started moving forward with the homebuying process. His down payment amounted to 10% of the total price of the new home – this lump sum represented the entirety of his savings.
What Steve didn’t take into consideration were the closing costs associated with homebuying. Steve was able to put down $20,000 toward the new home purchase. However, with the home value being $200,000, the 3% closing costs were an additional $6,000. (Closing costs in Florida can be higher or lower than 3%.) This fee covers such things as title insurance, appraisals, settlements, recording fees, flood certification and more. It’s a non-negotiable fee that must be paid by the buyer.
In order to cover these extra costs, Steve had to ask his parents for a loan from their savings. This money would have to be paid back as quickly as possible to his parents – an added monthly expense on top of his new mortgage payment.
The other cost Steve didn’t consider was moving expenses. The cost of hiring professionals to move his heavy furniture and boxes was simply too much, so Steve had to enlist the help of his friends to move items up to the 4th floor condo. While this wasn’t a deal-breaker, manual labor wasn’t something that his friends wanted to spend a whole weekend doing for their buddy. (And Steve had to repay their kindness with food and beverages!)
Ultimately, Steve was able to buy his first condo. But, due to financial issues, the process was more stressful than it should have been. Before you decide to take the homebuying plunge, make sure you fully understand all of the costs involved.
Clear Title is a title company in Pensacola, Florida, led by Board Certified Real Estate Attorney Stephen R. Moorhead. For over 30 years he has honed his skills in real estate closing and built a team of experienced, trustworthy experts to keep the horror out of home buying. When you trust Clear Title, you’re getting 100s of years of combined experience in your home buying court.
To schedule a meeting with our experts and explore our Pensacola title services, contact us today at (850) 202-8518 or visit ClearTitlenwfl.com.