The Real Cost of Buying a Home – Are You Prepared?

If you're thinking about buying a home, you probably have your down payment in mind. But what about the other expenses that come along with the home purchase? Let's break down the often overlooked costs so you can budget wisely and avoid last minute surprises.

First up, closing costs. These typically range anywhere from about 2 to 5% of your loan amount, and they cover things like lender fees, title insurance and escrow charges. Many buyers forget to factor this in, so make sure you plan ahead.

Next, home inspections. A must have to avoid costly surprises. Expect to spend somewhere in the neighborhood of 500 to $800, depending on the home size and location. Inspections and the appraisal are paid upfront at the time of service, while the rest of your closing costs are due at closing. You may decide that additional inspections are needed like mold or sewer line checks, which can add to this total, but they are worth it for peace of mind.

Then there's property taxes. San Luis Obispo County's base tax rate is 1% of the assessed property value, plus any local bonds or assessments if they apply. Some lenders require you to pay a prepaid portion upfront at closing, so be sure to check with your lender on that.

And don't forget homeowner's insurance. It's a must have if you're getting a loan. And to protect your investment, the cost can vary greatly depending on the property. But budget somewhere around 150 to $200 a month for coverage. Shopping around for the best rate can help you save.

Lastly, we need a budget for miscellaneous or unexpected expenses. Moving costs, new furniture, HOA fees, or even small repairs. Those can all add up. So a good rule of thumb is to have a cushion of about 1 to 2% of the home's price set aside for any surprises.

The key to a smooth homebuying experience, know your numbers, budget wisely and work with an expert who can guide you through not only the homebuying process, but also help you come up with a realistic number that you'll need to get your foot in the door on your first or your next home. If you have questions, reach out. I'm happy to help.