Cost of Buying a House in California 

Every house for sale has an equivalent price. If you are curious to know the cost of buying a house, then you are just one of the many people who also want to know the figure.

Before you grab a certain property for sale, you should learn to assess its affordability. Surely, there will be several factors that you need to consider. If you plan to buy a house, you should understand the entire costs involved. The buying cost that you haggle when purchasing a house is just the outset – it is not the final figure.

Never allow the extra expenses to frustrate you. This article will focus on breaking down the most typical costs you have to prepare for when purchasing a house.

Understanding the Costs of a House

There are various aspects you need to check when checking for the cost of buying a house:

1. Down Payment

The down payment is the fraction of the sale price that is likely to be paid upfront when purchasing a house. The remaining sale price shall then be funded by the mortgage. The general criterion is that the greater the amount of money you give as a down payment, the better.

There are several types of loans that you can avail of. Depending on the loan type, your down payment can vary from 0 to 20 percent of the buying price of the house. Large-scale financial establishments such as credit unions and banks provide two loan types: the government-insured and the conventional type. Now, your choice of loan type can greatly impact the required down payment.

The government-insured loans are USDA loans, VA loans, and FHA loans. The lender from this type of loan is being guaranteed by the government. The insurance shall give lender protection against homebuyer delinquencies.

Lenders on conventional loan types, on the other hand, are not insured by the government. This type of loan exhibits remarkable interest rates, however, it requires higher down payments.

2. Closing Costs

To finalize your loan and finally acquire the house, you have to settle the closing costs. These are the fees related to the mortgage. The cost commonly ranges from 2 to 5 percent of the principal amount, and may include the following:

• Application fee
• Credit check fee
• Appraisal fee
• Title insurance
• Origination and underwriting fees
• Transfer tax (if needed)
• Title search fee

However, if you are more inclined toward savings, you can find a lot of lenders that give no-closing cost mortgages. This is where the closing costs are simply summed to the principal loan, or if not, settle through greater interest rates. Either of these approaches will not require you to have available cash for upfront closing. However, this will eventually cost you higher, specifically if you plan to settle in the home for good. Jointly, the closing costs normally charge up 2 to 5 percent to the home’s purchase price.

There can be a way that you can avoid the closing costs. You can negotiate with the seller if he or she can shoulder a portion or entire closing costs. It is just that when negotiating, you should be able to establish a give-and-take relationship. Just be mindful though that if you are wrestling in a tight housing market and there are many offers to the seller, negotiating with the seller about the closing costs could lead you to lose the bid.

3. Reserves

Most first-time buyers are not knowledgeable about reserves. Although reserves are not literally a composition of the costs when buying a house, they speak for the money which you need to keep in your bank after you settle the down payment and the closing costs.

Mortgage companies will not agree that you use up your savings after you purchase a property. Instead, they prefer to see that your bank account is still funded so you can have the resources when paying for the mortgage, in case you encounter a problem with your source of income.

4. Property Taxes

Most areas require residents to settle property taxes as long as they own the house. Commonly, the mortgage payment every month is included in the property tax but is different from the principal and interest.

Remember that the assessed value isn’t the same as the price you pay for the home. If the prices of homes in your area increase, the city can assess your property at a greater value, which means that your obligation to property taxes will be higher.

5. Mortgage and Homeowners Insurance

You will have to consider two types of insurance when planning to buy a house: PMI or private mortgage insurance and homeowners insurance.

The purpose of homeowners insurance is to financially secure the homeowners in case something injurious happens such as natural disaster, vandalism, or theft. Although homeowners insurance is not implemented by the law, many mortgage lenders impose it in a certain way. The cost of the homeowners' insurance essentially differs. It is suggested that you check and compare offers so you can reduce your expenses to the minimum.

You will typically get lower costs if you consider bundling homeowners along with your life or auto insurance policies.

If you avail of a conventional type of loan and you give a down payment of not more than 20 percent, PMI will be normally required. PMI secures the lender in case you fail on your loan, and may substantially increase the mortgage payment. Nevertheless, PMI is not permanent. As you settle down the mortgage and establish possession in your house, you can eliminate PMI.

6. HOA Fees

HOA fees are commonly imposed if you are purchasing a condo or any type of home that is managed by a homeowners association. The HOA fees are specified by the HOA, and they are essentially wavering. These funds are used on the services provided by the association. Common services include security, gym, pool, maintenance, and landscaping.

A homeowners association may also collect random fees for the special assessment for immediate repairs. These costs can be neglected if buyers sum up the costs of purchasing a house, however, although they quickly size up. The average HOA fee is around $62 per month.

7. Home Maintenance, Repairs, and Utilities

Regardless of the location of your home, you have to be ready with repairs and maintenance. It is normal for any home to experience wear and tear, hence, you must have an available budget whenever you need to replace or repair your appliances as well as the major systems and structures like the HVAC or roof.

Experts suggest that you allocate one percent of the value of the home for the annual maintenance, as well as securing an emergency fund in case something urgent happens.

Maintenance refers to recurring and common expenses such as gutter cleaning, carpet cleaning, and lawn mowing. Repairs, on the other hand, refer to repairing any features in the house that breaks. A leaky toilet, for instance, will need repair. The average cost for maintenance and repairs of homeowners is around $2,289.

You should also expect that the costs for maintenance and repair can go higher while your property ages since its components will eventually wear out through time.

You should also consider the costs accumulated when you pay for the utilities. These could include electricity, gas, water, and sewer. The costs for these expenses can differ based on your location. However, it generally applies that bigger houses have higher utility costs.

How to Get Ready with Purchasing a House

If you think that you deserve homeownership, then you should also find a way to persuade a lender about your qualification. It means that you should have good credit, you are not wrestling with huge financial obligations, and you also have a big cash cushion that can be used for the upcoming expenses.

Lenders will normally check on various metrics to see whether you qualify for a home loan. The amount you owe versus the amount you are earning plays an essential part when applying for a loan.

There is one thing that you should do if you want to come equipped for the process of mortgage application and that is to evaluate your credit score and perform a debt gut assessment. No matter how insignificant your improvement may seem, it can potentially add up and conclusively improve your credit score. As a consequence, you can get a better interest rate on the house loan and save more money.

Conclusion

Everybody wants to own a home. However, the cost of buying a house can quickly add up. Thus, it is always best that you are prepared for the current and future expenses. You should consider saving money, maintain or work on your credit and check on various lenders so you can avail the best rates on a mortgage.

It is a fact that buying a house can be quite expensive. However, if you utilize the information about the different factors that comprise the costs of the house, you can be more prepared once you reach the time of finally making that purchase. Just do not forget though that the cost of buying a house can either go high or down as it can be affected by your particular location.