Factor in all costs and fees when calculating the cost of purchasing a home.
Buying a home is a complicated process and many parties are involved. From the lender and title company to the real estate agent and government, you will have to deal with a large number of people to complete the process. Most of these parties will have a fee or cost associated with their services, which will add to the cost of purchasing a home. You must remember to take all of this into consideration when calculating the cost of purchasing a home, and not just take the asking price at face value.
Instructions
1. Figure out the loan amortization schedule. How the interest is calculated and applied to the loan can be one of the most important things to consider when calculating the total cost of a home. Most of the interest will be applied to the loan during the early years of the mortgage when your loan balance is the highest; over the life of the loan you may end up paying more in interest than the asking price of the home. This will effectively double the cost of your home. Use financial planning software or one of the many calculators online to calculate the amortization.
2. Factor in the cost of the down payment. Multiply the percentage your are putting down by the total cost of the house; for instance, 3 percent down on a $100,000 home is $3,000.
3. Account for the settlement fees associated with buying a home; these include the closing costs, assessment costs, insurance fees and other fees. These fees can add up to thousands of dollars depending on the value of the home you are buying. Note that these costs are often divided between the buyer and the seller, so you may only have to pay half of each.
4. Include the costs of any inspections you will have performed. It is prudent to have all aspects of the home professionally inspected before purchase; inspection fees can range from $100 to $500 depending on the type of inspection and the amount of analysis you expect the inspector to perform.
5. Account for any additional fees that may be assessed. For instance, if you require an attorney to look over any paperwork or contracts this will add to the cost of purchasing the home. Always have additional money in savings that you can use in case unexpected costs arise during the purchase.
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