The key cost to consider when building or buying a new home is the cost of the home itself. When you purchase a new home from a builder, the cost typically includes the base price of the home (and lot) plus the price of any upgrades you choose - from fireplaces to other add-ons.
In addition, there are other costs that you should be aware of, from legal fees to mortgage insurance premiums, which can apply to a home purchase.
Discuss any specific items and costs that apply to your situation with your builder and your lender, so that you can budget with confidence and avoid being faced with unexpected last minute expenses.
Mortgage Insurance. If mortgage insurance is required on your purchase, all mortgages carry risk. If you finance over 80% of the property value, it is considered a higher risk than a loan equal to or less than 80%. For those borrowers who can't make the full 20% down payment, PMI (Private Mortgage Insurance) is considered a valuable financing tool that offers benefits to the lender and borrower. Mortgage insurance reduces that risk by protecting the lender.
Appraisals. The lender typically requires an appraisal to verify the value of the property that will be their security for the loan you are getting. The appraisal cost is part of the Buyer paid loan fees. This is often considered part of "closing/settlement costs."
Closing costs. When you show up to sign your closing documents, you will also be paying various fees known as closing costs. They can include processing fees, underwriting fees, state deed transfer tax, recording fees, survey and title insurance fees. Make sure to get an estimate of what the fees will add up to. A general rule of thumb is 3% of your home purchase price.
Moving expenses. How much are you willing to do yourself or ask of friends and family? Make sure to shop around for a moving company and get various estimates.
Appliances, furniture, window treatments. Once you've moved all of your existing items, you may find that it's not what, it doesn't fit or it doesn't properly work for the space you have. You may need more than you think. It's a good idea to budget in advance and not let these items catch you off guard.
Property taxes and homeowners insurance. If you have never had a mortgage before, be aware that your monthly bill won't simply reflect the loan amount plus interest. It will also reflect property taxes and premiums for homeowners insurance, which all mortgage borrowers are required to obtain.
Supplemental Insurance. If you buy a home in an area exposed to flooding, you may have to purchase a supplemental policy.
Homeowners association/condo fees. Consumers who buy into certain developments may have to pay an additional monthly fee on top of their payments for principal, interest, taxes and insurance. Condo and single family developments often charge residents for services that benefit the community, like lawn mowing, snow plowing or employing a front-desk attendant.
Utility connection fees. Transferring your phone, internet, cable and other utilities can be added expenses. Check it out. If you previously rented and are not accustomed to making all utility payments, do your research and know what to expect.
Double payments. If you find yourself in the unfortunate position of owning two homes for a period of time, you'll have to count on double payments. Don't forget that includes utilities, mortgage, taxes, etc. until the old house has been sold.