Buying a first house is one of the most exciting, and exhilarating milestones in a persons life. You have money in your checking and savings account, you have an emergency fund, and enough money for a down payment. Naturally, anyone would think this means they’re set, and are financially ready to buy a house. Unfortunately, many people forget to include all of the other expenses of buying a house that no one really talks about. A home costs more than the down payment and the monthly mortgage payment. Here are more expenses you’re sure to have to pay, and budget for.
Private mortgage insurance (PMI). If you do not pay the 20% downpayment or more (you are allowed to pay less than that under certain circumstances), then you’re going to be paying private mortgage insurance on the house. The bank makes you pay this so that they’re protected in case you default. Because obviously, if you can’t afford the 20% downpayment, it usually means you’re a little strapped regarding finances. PMI adds up to a few hundred dollars to your mortgage payments each month. However, the closer you put down to the 20%, the less PMI premium you’ll be required to pay.
Homeowners insurance. If you do not buy home insurance, it is the same thing as not buying health insurance. If something tragic happens to your house, you’ll probably go into bankruptcy. For example, if a fire burns down your home and you don’t have insurance, you’ll be paying completely out of pocket to fix it.
Most people can’t afford to re-build their house out of pocket. And actually, if you want to get a loan from the bank, they require you to have home insurance. Property taxes. These are charged by the government, to pay for the education system or parks and recreational activities. The numbers climb every year, so you should look at them to see the annual trends, to get an idea of what you can expect to spend for years to come.
Be sure to ask the seller to see a few months of utility bills. Don’t take their word for what they usually run each month. If they have a full year of bills available, you should look at the entire year to get an idea of what it costs to heat and cool the home annually. This includes water and electricity.
Do not underestimate the costs of maintaining a home. It is very expensive. You’ll have to pay for repairs, maintenance, home inspections, and more. You’ll have to have the roof replaced every 10-15 years. It is very important that you have the inspector inspect the roof before you buy the home.
The roof could be set to expire next year, and you’ll be facing tens of thousands of dollars to do so. You’ve also got to maintain the landscaping. If the home you are about to buy has impeccable landscaping, ask to see those bills. Find out how often the yards have to be maintained.
Lastly, don’t forget about decorating. Do you have money to furnish the house? How large is the home? After all of these expenses, will you have the money only to furnish two rooms? You don’t want a huge, brand new nice house with only a sofa and a television in the corner!