Closing costs - keeping a reserve.
Monday, November 13th, 2006
Most buyers assume that once they are pre-approved for a loan and have enough for the down payment, they can go ahead to buy. After all, the big expenditure is covered - what more can there be?
Quite often, comes a rude awakening; when closing costs and other expenses add up to a sizeable amount. Most buyers at this point have no option but to put it on their credit cards; at times, resorting to a cash advance. Between the fees for cash advances and the hefty interest rates for credit card debt, your savings on the deal could evaporate, leaving this a much poorer investment proposition.
Savvy buyers anticipate this, and keep a reserve. There are several costs which come up once you buy a home; some are one time costs like Title insurance, Loan charges and discounts, agent’s commission, inspection etc. You may also have to put down deposits for utilities or other services, or provide for minor repairs to make the property livable. Furnishing the house also takes a severe bite.
In addition, there are recurring costs - mortgage insurance, home insurance, rates and taxes, running repairs and maintenance. Make sure you’ve budgeted for all these in evaluating the purchase option.
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