Purchasing a new investment property can be a great thing. Once escrow begins, the euphoria can change to frustration, particularly if you are not ready for the closing costs that quickly accumulate.
Budgeting For Closing Costs
Closing costs simply refer to the fees associated with various things associated with the escrow process in a real estate transaction. In the excitement of having an offer accepted for your dream home, you can easily lose track of the fact you are going to need to have some serious cash on hand to pay them.
Many people make the mistake of only assuming they need the down payment money and have to rush around town trying to come up with the money for the closing fees.
If you are buying a home, you need to get a professional home inspection. Doing so can reveal potential problems with the home that you wouldn’t have otherwise noticed. Problems can include things such as rot, termites, water leaks, and a bevy of other issues.
The time to do this is during escrow. Of course, that means you are also going to have to pay for the inspection. Depending on the size of the property, home inspections can run a few hundred dollars up to a few thousand. Make sure you have money set aside for the fees.
Title insurance is something you absolutely must purchase when you buy any real property, a home, building, land, or whatever. Title insurance protects both you and your lender. Title insurance is just what it sounds like. A title company will research the title of the home and essentially guarantee that the title is good.
This means the seller actually owns the title and has the right to sell it to you. The title company will also make sure there aren’t any liens on the homes or other things that will cause you problems. Depending on the price of the home, title insurance can run you a couple of hundred dollars or up into the thousands. Again, it is important to find out the cost and budget for it.
Title insurance and a home inspection are two things you should absolutely have when purchasing a home. Budgeting is the single most important thing you can do when purchasing real estate. Be smart about your investment and make sure that you have the necessary financial support to follow through with it.