Expenses Buyers forget to Include When Budgeting for a House
Purchasing a first home is one of the most exciting turning points in a persons life. However, when considering buying a home, you must calculate all the other expenses besides the actual price of the home and your mortgage payments. A house costs much more than just the mortgage. Be sure you have money for the mortgage, and then some when you purchase it. Here are some expenses that you should expect, and set aside money for.
2. Private mortgage insurance. Unless you paid the required 20% or higher for a deposit on the home, you are going to have to take out a PMI, or, private mortgage insurance on the home. This policy is set in place to protect the lender—in case you default. This can add up to a hundred dollars each month on your mortgage. Of course, the closer you are to that required percentage on the downpayment, the lower your PMI premium will be.
3. Homeowners’ insurance. Homeowners insurance is essential. It’s the house equivalent of not having health insurance. If you have to replace your home if something truly bad happens, or it must be rebuilt, you’re pretty much in trouble if you don’t have it. And actually, if you borrow money from the bank to purchase the house, legally you must have homeowners insurance. These can cost up to a thousand dollars annually.
4. Property taxes. These are taxes charged by your local government to pay for expenses in the area such as parks or schools. A good idea is to look at the numbers, and see what the pattern has been in the past 10-15 years in terms of tax assessments, to see how much they’ve gone up. This will give you a good idea of how much you can expect them to rise year after year.
5. Utilities. You must ask the seller for 6-12 months of utility bills; you need to see what the bills generally run for all seasons. Otherwise, you can’t get an idea of how much you’ll be paying each year in water and electricity. Also add or subtract to that number depending on how many people will be living in the home.
6. Maintaining. When you purchase a home, you are responsible for the repairs and maintenance; there is no more calling a landlord to fix something when things go wrong. Be sure that you have an inspector inspect the home before you purchase it so that you can get a general idea of what you should be planning to expect. For example, if you know the roof might need to be replaced in 2 years, factor that in. Don’t forget to calculate little things into the budget too; if the washer and dryer breaks, if the plumbing explodes in the kitchen, or if the bathtub might need to be replaced at some point too. Imaging all of the little things that are possible to happen in the next 2 years and budget that out. There’s also painting the exterior, landscaping, all of those repairs can add up. To own a home, you must have 3-6 months of living expenses saved. While that isn’t required by law, it should be. You’ll be in a real bind if not.
7. Decorating. You must make sure that you love the home the way it is, instead of the idea that you’ll make it what you want when you move in. You might discover that your headboard won’t fit up the stairs the way the ceiling is placed. Be sure to make a list of how you plan to decorate, and see if it will be possible in the home. This is so that you can be sure you are able to do what you plan to do with the house, but also to see how much you’ll be spending. You don’t want to be “house-poor.” Owning a nice house is gerat, but not if you can’t afford to decorate it and have a sofa to sit on. Calculate rugs, towels, soap, TVs, literally everything. Even sheets and towels for all bathrooms can be at least $1,000 even if you get them at a store like Tuesday Morning.