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Buying a home requires more than money for a down payment. Upon buying a home, other costs of living increase. Because purchasing a home is an investment, careful calculation of costs prior to purchase will result in a better long-term return. Costs of buying a home fall into three categories: Closing Costs, Monthly Expenses and Moving Costs.

Closing Costs

The most easily calculated costs of buying a home are the closing costs. Closing costs encompass everything for which you must pay when "signing on the dotted line" at time of closing, or settlement. Closing costs include several types of fees, taxes, interest, insurance and a down payment. At the time of possession, the buyer presents a certified check for the closing cost amount.

Components of Closing Costs

Down payment
The down payment will vary with the type of loan chosen, and cost of the home. First-time home buyers may qualify for a HUD loan requiring less of a down payment. It is not always necessary to have a ten percent or twenty percent down payment prior to buying a home. Typically, until your equity in the home reaches twenty percent or more, you will be required by your mortgage company to carry Private Mortgage Insurance (PMI).

Fees
Included in closing costs are fees related to the process of buying a home. You will likely pay a Loan Origination Fee to the broker who originated your loan. Fees for the appraisal, attorney work, credit reports, title insurance, recording at the local register of deeds, home inspection, pest inspection, flood certification and various courier and mailing fees will be included in the closing costs.

Taxes
Closing costs upon settlement will include property taxes, city and county taxes to be placed in escrow. This ensures that funds are available when taxes are due.

Insurance
Mortgage companies require that home buyers pay up front for their first year of homeowners insurance and other insurances. As mentioned above, with less than 20 percent equity, homeowners typically must also carry Private Mortgage Insurance.

Interest
It is in the buyer's best interest to close near the end of the month. At time of closing, the buyer will pay prorated interest for what remains in the month. The fewer days between the end of the month and closing, the lower the interest amount needed at closing.

Monthly Expenses

Monthly expenses should be figured into the cost of buying a home. It is important to not purchase a home beyond ability to pay. Included in monthly expenses will be the mortgage

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