How Much Will It Cost to Buy a House in 2019?

Buying a house in 2019 is a significant financial commitment. Various factors come into play, determining not just the purchase price but also the out-of-pocket expenses you will incur. This article aims to break down these costs to help you make an informed decision.

Understanding the Purchase Price

The purchase price is the most straightforward cost. It is the price agreed upon between the buyer and the seller. However, before you seal the deal, there are several additional expenses to consider.

Financing and Mortgage Costs

Financing is often the most substantial additional cost. For a loan with a term longer than twenty years, the cost of the mortgage can be more than double the purchase price. This is because the interest charged over a longer term accumulates significantly.

Taxes on House Purchase

Depending on your location, you may need to pay various taxes when you purchase a home:

Property Transfer Tax: This tax is typically paid by the buyer and covers the transfer of ownership from the seller to the buyer. Escrow Fees: These fees are paid to a third party to handle the funds and ensure that the sale is executed correctly. Other Taxes: These might include county and city fees, which can vary widely depending on your location.

Pre-Paid and Prorated Reimbursements

Other expenses involve pre-paid and prorated reimbursements. These cover items such as:

Taxes: Pre-paid property taxes and other assessments that you need to pay upfront. Utilities: Pre-paid heating oil, electricity, and other utilities that need to be accounted for. Home Inspections: Costs for a home inspection to ensure that the property is in good condition.

Where to Buy and How Much to Spend

The amount you can spend on a house varies widely based on:

Type of Property: The type of property you are interested in, such as a single-family home, townhouse, or condo. Location: The state and city you plan to buy in, as some areas have higher property values and taxes. Desired Lifestyle: Whether you want a “beginner’s” house, which is smaller and cheaper, or a larger, more luxurious property.

To make a decision, determine how much you are willing to spend and where you want to live. For a typical "beginner's" house, you might be able to get one for around $200,000. Find a reputable lender who can pre-qualify you and provide a clear estimate of your borrowing capacity.

Additional Costs Beyond the Purchase Price

Several other costs become apparent when purchasing a house:

Home Inspection: You will need to have a professional check the house for any potential issues. Closing Costs: In California, these can include Escrow and Title fees. Depending on the state, you may also encounter additional county fees. Furnishing the House: You will need to purchase furniture, personal items, and fill the cabinets.

Loan and Payment Considerations

The cost of your mortgage depends on several factors, including:

Type of Property: Whether it's a single-family home, condo, or another type. State: The state where you are buying, as property taxes and county fees can vary. Type of Loan: Whether it's an FHA loan or a conventional loan. Down Payment: How much you are putting down, as this can affect the overall cost.

A rule of thumb is to expect around 3% of the purchase price to be your lender fees plus other costs, excluding down payments and taxes. Be mindful of taxes and county fees, as they can be quite high in certain states like New York and Texas.

Minimum Equity and Closing Costs

The amount of equity required can vary. For an FHA loan, the standard low down-payment is 3.5%, while conventional loans may require even less if your credit is top-notch. On top of this, you will also need to cover closing costs, which can range from $2,000 to $4,000 and are typically added to the house loan amount or paid out-of-pocket by the buyer.

Conclusion

Buying a house is a complex process involving numerous costs. It's important to research and understand each expense to ensure that you are prepared for the financial commitment. Consulting with a real estate agent and a mortgage lender can help you navigate these costs and make informed decisions about your home purchase.