Congratulations on your decision to buy your very first Austin home. You've done all the right things: saved up a nice downpayment, made sure your credit is in order and hired a REALTOR® you have complete and total trust in. You want to start looking for the perfect place to put down roots. As a first time homebuyer, however, you may be surprised to learn that there are other additional monies you will have to come up with besides the down payment. Don't get caught off guard by these expenses when you go to sign your escrow papers.
- Private Mortgage Insurance (PMI) - If you don't put down at least 20% of the sales price on your Austin home, you will have to pay an additional amount for PMI. Loan companies require this insurance on all loans taken out where the home buyer borrows more than 80% of the home's sales price. This covers their investment in you in case you simply walk away from the home. The only way around this is if you put at least 20% down on your home loan. Your premium will go down as your equity increases and will, eventually, go away once the principal on your loan is 80% or less of the value on your property.
- Homeowner's Insurance - This is another requirement of the mortgage companies. When you borrow money to buy a car, you are required by law to carry a particular amount of insurance on that vehicle as long as the loan company is the lien holder (ie, until you pay off your car loan). After that, the coverage can be decreased if you want. Think of homeowner's insurance the same way. Since the loan company is still partial owner in your Austin home investment (at least until you pay off the loan or sell it), they need to know that it will be taken care of in case of an emergency.
- Property Taxes - It is true what they say: nothing is certain but death and taxes. Property taxes are what help the local government and school systems operate. The amount will vary depending on where you live. If you are worried about coming up with a lump sum every year, your mortgage company can break it down into 12 equal sums to send in with your mortgage payment. Some people find this easier to handle.
- Homeowners' Association (HOA) Fees - Anyone who buys an Austin home in an HOA will have to pay additional fees every year to the HOA. This isn't just for condominium complexes either. Many subdivisions are run by HOAs as well. They help keep the common areas maintained as well as keeping the integrity of the community intact by enforcing the rules and regulations found in the C C & Rs.
- Other Expenses - These include closing costs, which typically run anywhere from 2-4% of the purchase price of your Austin home. Sometimes sellers will pay for a home inspection, but, typically, it is the buyer's responsibility. It is also smart because it gives you a glimpse at potential hazards that may be hidden from you on a regular walk through. Your mortgage company will also require you to get an appraisal done on the property to make sure it is worth at least what they are letting you borrow.
As you can see, it takes more than a downpayment to make your dreams of homeownership a reality. Additional expenses of buying a home are unavoidable. But that doesn't mean you can't own your own Austin home. I just don't want you to worry about scrambling to find additional money at the end of your search. Knowing what to expect can help you be prepared ahead of time. Let me know when you want to start looking for your Austin dream home and I'll be happy to help you.
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