Closing and Other Costs for First Time Home Buyers

First time buyer costsSo you are paying the rent and living with a roommate.  You and your partner have almost saved up enough money for a 5% down payment on a house.  Your mortgage broker / bank says you need to prove you have a further “1.0%-1.5% for closing costs" – what the heck???  On a $300K purchase, that could be a further $4500!  Where does that money go?

As first-time home buyers, here’s where the extra costs might crop up and why the rules say 5% is not enough…

  • There might be $400 for a home inspection to help uncover any structural and mechanical problems with the property before you purchase.
  • A property value appraisal may be required by the bank at $300+
  • $1,300+ for the lawyer to transfer the property title to you and record the mortgage on title
  • Property tax adjustment perhaps $1500 (if the seller pre-paid property taxes, you have to pay them back as much as 6 months' worth)
  • Some provinces have land-transfer taxes well into the thousands (~1% or more)
  • Property repairs required on move-in?
  • Utility connections prior to move-in (security deposits for first-timers)
  • Moving costs – consider renting a U-Haul and getting some friends to pitch in.
  • Any new furnishings or decorations.
  • Maintenance and repair emergency fund - things like the hot water tank or furnace may need replacing unexpectedly (set aside $100/mo in a special account)
  • House insurance - $100/month. You don’t want to owe a quarter of a million dollars on a pile of ash after a house fire!
As you can see, there are a lot of costs involved in setting up your new home. For low down payment mortgages, lenders require you to prove you also have something set aside for the "closing costs."
 
Check out our Homebuying Step-by-Step Guide for more information. Learn more at Can You Get a Mortgage, or click for a free mortgage pre-assessment/ consultation.