For current or prospective homeowners considering a home purchase, it’s important to understand all the costs associated with buying a home. Extra costs to look out for include home insurance, mortgage insurance, earnest money and life insurance (required by some lenders), property taxes and appraisal fees. Learn more about these expenses and how to budget for them when setting your budget for a new home.
Fortunately, unlike some states, Texas does not have a property transfer tax. However, Texas has the some of the highest property taxes in the United States.
The Lone Star State has an average property tax rate of 1.69% compared to the U.S. Average of 1.07%. based on this rate, the average tax that could pay an average of $3,400 a year in property tax. You can use a property tax calculator to determine how much you will pay in taxes on a home you’re interested in buying.
Unless you’re paying cash, chances are that you’ll pay a monthly fee that includes the principle, interest, property tax and mortgage insurance. So, it’s important to include property taxes in your budget.
When considering the cost of homeownership, it’s important to include insurance costs related to buying and maintaining a home. This includes fire and content insurance, title insurance, mortgage insurance and life insurance. The total amount you pay depends on many factors including the location, size and value of your home.
Homeowners in Texas pay the seventh-highest home insurance in the country. It averages out to $1,863 per year for $250,000 in coverage. So, purchasing protection for your home costs 42% more in Texas than the national average premium of $1,312.
You need title insurance to prove that the property is available for sale free and clear of any liens from unpaid taxes and other unresolved debts. Title insurance varies from around $100 to over $1,000, depending on what the property is worth. For examples of what you might pay in various Texan cities, visit the Texas Department of Insurance site.
It’s also important to understand whether you need separate flood and fire insurance due to the risk of natural disasters in your area. The high incidence of tornadoes, hurricanes, fires and other natural disasters that impact Texas tends to keep the cost of insurance high.
When it comes to mortgage insurance, this can also be an additional fee, if you have less than a 20% down payment when purchasing a home. Private mortgage insurance protects the lender on a conventional mortgage in the event that the homeowner defaults and the lender foreclosed on the property.
Appraisal and Inspection Fees
If you wish to have the property appraised, you may pay from $300 to $500. You may pay around the same amount for a home inspection fee that can forewarn you of undisclosed HVAC, plumbing and other problems with the property you want to buy.
Now that you know about some hidden costs associated with buying a home, you can contact us and we’ll assist you in adjusting your budget accordingly, and guide you in making sure that you’re purchasing the right home that fits your budget. It’s also important to do your own research and work with your lender to get the most accurate estimate of your total monthly and annual payments, as well as understanding down payment options and closing cost. This will allow you to make the right decision when buying a home.