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The "Real" Cost of Buying a Home

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03.08.2021

What's up, everybody? This is Brandon Copeland, aka Professor Copeland. You are now tuned in to another episode of Cope'ing With Money.

On this episode of Cope'ing With Money, we're looking at something, as usual, very near and dear to my heart, but also timely, because I'm actually doing it right now. We're talking about not just moving into a home, but figuring out the actual cost of buying a house.

You see, when we go into a car dealership, we know that there's the sticker price and the actual price. By the time you get done adding all the fees and the different costs associated with actually purchasing your car – or in this case, your house – that sticker price doesn't really add up or do it justice. Now, when purchasing a home, I get it: We all get butterflies, we're all getting excited, we're getting ready for the 'Gram, going to take some pictures with the keys in our hand, showing everybody I'm a homeowner now.

But let's make sure we really understand the full cost of home ownership prior to purchasing.

I always tell my life one-on-one students: Peeling back the layers of the real cost of these major life decisions actually enables us to fully understand the money it takes to purchase these things confidently, as opposed to hinder us or make us feel threatened to even consider them. And while there will always be surprises, with proper planning and this video on your side, hopefully there will be no major obstacles that sink your budget when purchasing your first home.

Also, final disclaimer: Before we get into it, understand that this is just a guide. Similar to most things in life, every home is different – different shapes, different sizes, conditions, areas. So it is very tough/impossible for me to predict every single expense that your particular home purchase may incur.

But, we're going to talk about it from a high level and hopefully this guides you on a deeper conversation that you can have with the experts in your area.

So, you've made it to the closing table. One thing we would like to be able to do if possible is be able to pay 20% down.

I know, there's a bunch of people saying, "Hey, I saw you can pay as low as 3.5% down or 0% down." I get it. Or also there's some people who say, "Hey, I can't even afford to put 20% down."

But I want to just make sure you're aware of this: If you're not able to put 20% down, you definitely need to have a detailed conversation with your lender because you will be paying private mortgage insurance, otherwise known as PMI.

Private mortgage insurance is an insurance that your lender puts onto your monthly statement that insures them in case you default on your loan. Aka: "If you don't pay, we're going to get all of our money back regardless."

The amount you pay will depend on the size of your loan and also the insurance rate. Again, this is where you need to have a great conversation with your lender because the type of loan you have will determine whether or not that PMI falls off once you reach that 20% mark of your loan........

© Kiplinger


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