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Buyers: Don't forget the extra costs

In buying a home, the two major components most people focus on are the down payment and the loan amount (monthly mortgage payment). But there are other costs to consider as well; property taxes, insurance and closing costs.

Property Taxes: The next big expense in owning a home, besides maintenance and improvements, is property taxes. Property taxes are approximately 1.25% of the purchase price in Marin - paid twice a year or paid out by an impound account. If you are buying a $800,000 home, your yearly property taxes would be about $10,000 year ($833/month). If you are buying a $1.5M home, your property taxes would be around $18,750 year ($1,500/month).

Home Insurance: Required by lenders, but also should be purchased if you are buying a home with all cash. Home insurance will cover damages to your home with a caveat of some exclusions. It can cost anywhere from $1,000 - $3,000 a year - depending on your coverage and the value of your home.

These two costs combined could add a sizable chunk to your monthly payment.

In addition, you will have closing costs that must be paid into escrow by the close date and inspection fees. These costs are in addition to your down payment.

Lender fees: For each point you pay to buy down your interest rate on the loan is equal to 1% of the loan amount. If you borrow $700,000, you will be paying $7,000 to get this loan.  That does not include lender fees.

Title and Escrow fees: It is customary in Marin that the buyer pay for these fees.  These fees are quoted based on the purchase price of the home and the loan amount.  Typically starting at $3,500 and up.

Home Inspections:  Depending on the age of the home and condition, you should budget at least $1,200.  Home inspectors typically charge $500, Pest inspectors $350, Chimney $150 (cleaning included) and Roof ($150).  The inspectors might also recommend additional inspections by specialists; pool & spa, drainage, soils, etc.

Lenders are going to approve your loan based on your debt-to-income ratio. They are going to take into account all of these expenses above when determining what they will loan you for the new home.

If you have not sat down with a Mortgage Advisor to run the numbers, I highly suggest you do before you start shopping for a home. In addition, seller's require a pre-approval letter from your lender with your offer. No pre-approval = invalid offer.

I am happy to refer you to a Mortgage Advisor. I work with several that are local and on top of the financial changes in the market. Contact me for more information.

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