Thinking of buying a home? Wondering how much cash you’ll need to have saved up ahead of time? A lot of terms get thrown around like “escrow” and “closing costs” and other out of pocket expenses. If this is your first time buying a home, it can all be a little confusing or even daunting. If this isn’t your first time, you may be looking at a different type of loan this time around, or the combination of not only buying a home, but selling yours too. Before you even start looking at homes for sale in Greensboro, NC, you should get a better understanding of the extra costs associated with buying a home.
What is Escrow and Do I Need it?
An escrow account is used as a way to be sure property taxes and homeowner’s insurance are covered as part of a mortgage. Property tax may only be due once a year, but when it comes around the amount is often thousands of dollars. Most people don’t have that kind of money saved up to cover a bill of that size. Homeowner’s insurance is similar to taxes in that it is only due year or every six months in some cases, but when it comes, it’s a hefty bill. By paying into an escrow account on a monthly basis you can be sure those costs are covered. Typically the amount is added into your monthly mortgage payment so that you pay one amount that your lender splits between the loan itself and the escrow account. Some lenders require you to pay escrow and others don’t. Choosing not to pay escrow, so long as you are making an informed decision and you understand that you’ll need to save the money on your own, may be beneficial. For one thing, the amount you pay to escrow is an estimation by your lender as to how much they think your property taxes and insurance will cost. If it turns out that your taxes or insurance due exceed that amount, you may be required to pay the difference out of pocket. Escrow can give you a false sense of security in that case.
What are the Out of Pocket Expenses to Expect?
Typically “out of pocket” refers to closing costs, inspection, appraisal, and title fees. These things are all required in order to officially purchase and close on a home. They are considered to be “out of pocket” because they are additional fees that go beyond the price of the home you are buying. In many cases lenders will roll closing costs into the total loan amount in order to make the process more affordable for homebuyers. Sometimes closing costs and other expenses can be negotiated into the deal with the seller. Discuss your options with your agent and lender to determine the best course of action.
Now that you understand the expenses associated with home buying, you can start looking for homes for sale in Greensboro, NC. Smith Marketing and Allen Tate Realtors® can help you find a home that meets all of your most important criteria. If you also need to sell your current home, Smith Marketing will handle the listing process so that you get the best possible offer. Call today: (336) 215-7880.