Buying a home; you take out a loan, make a down payment, then arrange to have the rest of what you owe broken down into monthly payments for the next 30 years. Each payment is called a “mortgage payment.” Well there you go.
Oh if only it were that simple! As it turns out though, there are quite a few other significant costs of owning a home that you may not be accounting for.
1.) Closing costs. These are going to cost you at least a couple thousand dollars, as they typically range from 3%-5% of your home loan. That means a $150,000 loan could cost you roughly $6,000 in closing costs. However, if you can’t get the seller to come down on the asking price of the home, you may be able to negotiate for closing costs instead, which will still save you a substantial amount of money.
2.) Maintenance. When renting, your maintenance is covered, so if one of your pipes burst it’s really not your problem, you just call the landlord and bunk up with a friend for a week or two. But when you’re a homeowner, things are a little different. The cost of fixing your pipes and your flooded basement is now on you, so it’s important to make sure you have a little bit of money in savings in case of a maintenance emergency.
3.) Homeowner’s Insurance. This is an essential part of being a homeowner. Not only does it cover damages to your home and the belongings inside of it from natural disasters (check your plan to be sure of which ones) and theft, it also provides medical coverage if someone else is injured while on your property, so that roofer can’t hold you liable if they happen to clumsily fall through that shoddy section of roof they’ve been called to repair.
4.) Property Taxes. Property taxes are generally figured by assessing the value of the home, and then multiplying the official assessment by the local tax rate. Property taxes can change with the value of the home, so make sure you have an assessment done before you purchase to make sure you’re aware of the correct amount you’ll be paying in property taxes.
5.) Fixer-upper costs. When you buy a new home, there’s most likely going to be something you don’t like about it. Maybe you can’t stand the color the living room is painted, or you want new countertops or your yard desperately needs new landscaping. Regardless, all of these improvements cost money, so creating a “fixer-upper” budget when you purchase the home will help you keep your finances in order while still allowing you to make your new home the home of your dreams.