Answering Common Borrower Questions: “What are some of the Hidden Costs of Homeownership?”

Encourage your borrowers to budget beyond the down payment.

The many hidden costs of homeownership can be downright intimidating , particularly for first-time buyers. Remember, this is the biggest purchase most people will ever make. In fact, a whopping 57% of them cite costs as their single biggest concern!

That’s why it’s critical to talk with your clients about the hidden costs of homeownership. By taking the time to answer their questions, you can ease anxieties, bolster trust, and ultimately promote borrower education.

So, let’s dive into some of the most common borrower questions surrounding hidden costs and their comprehensive answers:

“What are Some of the Hidden Costs of Homeownership?”

First things first, you’ll want to shed some light on the most common hidden costs. Here’s a sample script you can use:

“Some of the most common hidden costs of homeownership include:  

• Home inspection. A thorough inspection can help shed light on any current or potential future issues. The cost of tt is typically covered by the buyer.
• Closing costs. Buyers are responsible for certain fees when they close on a home especially if they used a mortgage loan to purchase the home. These might include property taxes, homeowners’ insurance, an underwriting fee, a title fee, attorney fees, and more.
• Moving costs. Costs associated with breaking a lease, hiring movers, purchasing materials to pack up belongings, and maybe even new furnishings.
• Repairs and maintenance. Depending on the home, this might include replacing appliances, routine or major maintenance to home systems, completing a deep clean, pest control, lawn care, and more.
• HOA fees. If you purchase a home in a homeowners’ association (HOA), your dues will help keep common areas and amenities in tip-top shape.”

Of course, this list is just a start.

To really go above and beyond here, you can help the client research and compile a list of any and all hidden costs that might apply to their specific situation.

“How Much Will I Pay in Hidden Costs?”

Naturally, clients will probably wonder what the total will come to next.

Explain that the final amount will depend entirely on the home they choose, the loan they receive, and even the professionals they choose to work with.

A good rule of thumb to pass along: Markets with more affordable real estate tend to come with more affordable closing costs. Markets with more expensive real estate, on the other hand, tend to come with more expensive closing costs.

To go above and beyond, consider sharing some cold, hard numbers. Today, the national average amount a buyer pays annually in homeowner costs hovers around $15,000 per year. You can also look up the facts and figures for your state, if you’d like to get more specific. Some of those annual expenses may be paid for the first year as part of your closing costs.

After you’ve shared the number, give clients some time to reflect and adjust to their new reality. After all, $15,000 annually is a pretty big chunk of change for the average consumer.

“How Can I Best Budget for Hidden Costs?”

Driven clients are going to want actionable steps next.

Here’s a sample script you can use:

“To budget for hidden closing costs, I recommend the following steps:

1. Get clear on the costs you’ll be responsible for. We can complete some research and run some numbers together, so you’ll have a ballpark figure in mind.
2. Set up a personal budget. If you don’t already have a budget in place, you’ll need to get clear on exactly what’s coming in and going out. This will clarify how much you can afford to save for expenses like closing costs.
3. Place your savings in a separate account, or even a separate bank. Out of sight, out of mind! These funds are for future you, so make sure they’re effectively tucked away.
4. Take advantage of interest. Compounding interest builds on itself. If you store your savings in an account with a higher interest rate, your balance will grow that much faster.
5. Just keep saving. It won’t happen overnight. But with some time and dedication, eventually, you’ll have the right amount saved up.”

You can tweak the above based on your own advice and best practices, but do your best to provide clear, easy-to-follow instructions no matter what. Anxious and uncertain clients are sure to thank you.

Also remind borrowers that some of the costs associated with buying a home, such as closing costs, can be included in the mortgage loan. This means that instead of having to save a large amount of money to pay these expenses upfront, borrowers can spread the costs over the life of the mortgage, making it more manageable to afford the home.

Final Thoughts: The Hidden Costs of Homeownership

The many hidden costs of homeownership are enough to make any buyer balk. That’s because the unknown is nothing short of terrifying.

By answering borrowers’ questions related to hidden costs thoroughly and compassionately, you can help ease anxieties, promote borrower education, and overall improve the mortgage experience. Talk about a win-win-win!

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