Unexpected Expenses of Kona Houses for Sale
Individuals looking at Kona houses for sale, especially first time homebuyers, may exceed their spending capacities if they are not well-informed. Often, buyers make the mistake of looking solely at sticker prices. Equipped with a loan and a house of reasonable price, buyers launch into the process of purchasing a home unprepared for hidden expenses. The result: scrambling for additional financing, diversion from current expenses, and an unwarranted level of stress. At Craft Realty, we seek to equip those looking at Kona houses for sale with knowledge that will allow them to take such expenses into account. In so doing, we are able to help our clients find their true bottom line, simplifying the home buying process. Below we have listed five unexpected expenses for homebuyers to take into account.
Front End Fees
Lenders charge “origination fees” for processing new loan applications. These fees typically amount to .5%-1% of the total mortgage loan. New legislation has made these expenditures more transparent, but these pesky fees remain likely to surprise an unknowing homebuyer. We advise homebuyers looking at Kona houses for sale to look at the annual percentage rate, or APR, of a loan. While the interest rate is the borrowing price of the initial value of the loan, the APR expresses the cost of the loan more broadly, taking into account origination fees. Therefore, the APR provides a more accurate estimation of what a buyer will spend on a loan.
Mortgage Add-Ons
Buyers looking at Kona houses for sale know that they must find a sensible mortgage plan with affordable monthly payments. However, many people don’t know that mortgage payments are often attached to other necessary payments. Specifically, lenders charge for “escrow items,” which include property taxes, homeowners insurance, and private mortgage insurance. These mortgage escrow accounts can be beneficial as they streamline costs, combining multiple expenditures into one monthly payment. Many homebuyers, though, are not prepared for the magnitude of that payment.
Additionally, lenders typically request six months of property taxes or more in an escrow account before they begin to cover your expenses. This provision acts as a buffer against potential tax hikes. They also often require a full year’s worth of homeowner’s insurance—a significant payment that does not absolve buyers from their monthly insurance payments. Investors should note that insurance costs tend to be higher for investment properties than for primary residencies. Buyers looking at Kona houses for sale should communicate clearly with their lenders to get a clear picture of their projected payments.
Additional Taxes
If a buyer is lucky, they might purchase a home at the transition point between property tax billing periods. However, most buyers simply aren’t that lucky. In some instances, the seller will pay property taxes for the portion of the billing period before the house is sold. Often, though, buyers are responsible for paying the entirety of the property tax come the end of the billing period, even if they purchased their home late in the period.
These additional property taxes sometimes amount to thousands of dollars depending on the location, property size, and length of the billing period. Buyers looking at Kona houses for sale should be sure to communicate clearly with sellers, striking a deal for property tax payment that is favorable to both parties.
Inspections of Kona Houses for Sale
Lenders typically require a housing inspection before the closure of a housing deal. Depending on the age and location, buyers may even need to pay for multiple inspections. A single inspection often costs over $100. Inspections may seem like a pesky expenditure, but homebuyers should never forego them. Adequate inspections protect buyers from closing on deals that will lose them vast sums in future repairs. Buyers looking at Kona homes for sale should prepare to spend up to $1,000 or more in inspection costs.
Miscellaneous Expenses and Closing Costs
The HUD-1 Settlement lists the totality of expenses and payments involved in the loan transaction process. The list reveals the multitude of miscellaneous expenses and closing costs that are part of every transaction. Lenders may require appraisal and inspections, and the fees for such requirements add hundreds of dollars to your total expenditures. Other items in the HUD-1 Settlement may include costs for attorney services, title insurance and search, and specific lender fees.
Often, these expenditures amount to 2%-5% of the total home purchase price. The median value of Kona homes for sale is $495,000. Miscellaneous expenses and closing costs for a median value home in Kona could therefore amount to an additional $24,750. It is therefore crucial for buyers looking at Kona homes for sale to take these expenses into account. Otherwise, buyers might have to abandon an unaffordable deal at the closing table.
The prospect of hidden expenses should not deter homebuyers looking at Kona homes for sale. Educating yourself on housing expenses and keeping strong, clear lines of communication with your lender and seller will ensure that you can take all fees and expenses into account and avoid exceeding your bottom line. Home buying can be an intricate process, and information and communication will be your key tools for success. Trust us—life on the island is more than worth the process.