Jeff’s Carlsbad Blog for First Time Home Buyers

Fees, Fees, Fees – Where Does it Stop?

Posted in Financial,Homeownership,Taxes by Jeff Dowler on February 14, 2008
Tags: , , , , , ,

question-mark.gifBuying your first home can be a daunting experience. Just the thought of spending hundreds of thousands of dollars and having a monthly payment of $2500 or more is scary. Some folks decide to keep renting rather than have a higher payment – understandable, although the trade off is NOT having the tax advantage, building your credit or adding to your wealth by building equity.

New buyers are often NOT aware of some of the fees to expect on top of paying a monthly mortgage payment. better to know in advance so you are prepared, and can effectively manage your personal budget.

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Here are some additional fees you MAY have to pay:

  1. Home owner association fees (HOA) – these can range from perhaps $60 per month to $300+ per month. Not tax deductible but check with an accountant
  2. Home owner’s insurance – may be escrowed (collected monthly as part of your mortgage payment or paid separately – varies with the lender. This could be $500 – $1000 annually, maybe more.
  3. Utilities – you probably pay most or all of this already if you are renting but don’t forget them. And in a condo or house they could be more (gas, electric, water, sewer, trash)
  4. Private Mortgage Insurance (PMI) – if you are financing more than 80% of your purchase (i.e., your down-payment is LESS than 20%), you likely will be required by your lender to have PMI, which protects the lender in the case of a default. I am not advocating a particular bank but here is a good informational piece on PMI.
  5. Property taxes – you can’t avoid them and they can really add up. Find out how much they are (but a ROUGH estimate here in California is 1% of the purchase price – they vary widely by community). These are normally part of your monthly payment (escrow) so the bank can pay the taxes when they are due. YOU are responsible for getting the tax bill to your bank in time to make the payments.
  6. Mello Roos – some areas (especially new subdivisions) will levy additional fees called Mello Roos. Again, not avoidable and they can last for years. Check with an accountant regarding tax deductibility.

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