5 Costs First-Time Homeowners Forget

Transitioning from a renter to homeowner is a significant economic milestone for many, though it isn’t always a smooth one. Purchasing a home entails a degree of planning and research, particularly if it’s your first time.

Numerous first-time homeowners usually forget that there are more costs involved in purchasing a home than mere property costs.

You must also consider hidden costs such as maintenance. However, these costs shouldn’t put you off from being a homeowner. If you don’t want your fist home to become an economic nightmare, don’t forget these costs.

1.     Property Taxes

This is typically a proportion of your home’s value and differs depending on location. However, Americans pay an average of $2,216 in property taxes annually.

Bear in mind that your taxes could rise and affect your monthly housing expenses despite having a fixed-rate home loan. Local governments typically use property taxes as a major income source, allowing them to fund public expenses, for instance parks and schools.

It’s important to inquire about the current annual property tax from the seller or seller’s agent. Ensure you obtain a quote, so you can budget before purchasing a home.

Bear in mind that the yearly tax is non-negotiable and its disclosure is usually on the home listing. You can decide to include this cost in your monthly mortgage payments or pay it as a separate bill. Either way, you must prepare for this extra first-time homeowner expense.

2.     Closing Costs

While some buyers manage to bargain with the seller for a contribution towards these costs, you must prepare to pay from 2%-4% of the loan amount depending on your location.

Closing costs usually include appraisal fees, title insurance, inspection fees, and attorney fees. One of the expenses first time homeowners forget is title insurance. This form of insurance covers economic loss from flaws in the property to the title.

A title policy serves to protect a lender or owner’s economic property interest against loss because of title defects or other issues.

The insurance will guard against a lawsuit or reimburse the insured for financial loss. You should definitely consider the one-time expense to avoid future inconveniences.

3.     Maintenance

While this won’t be evident in your mortgage payment, the expense is real. Therefore, it’s advisable you budget some amount annually for regular maintenance.

As a homeowner, you don’t have the luxury of calling the landlord in case of repairs. Maintenance can involve things such as painting, upgrading or fixing wiring and plumbing, substituting roof shingles, and garden maintenance.

The amount you’ll need for maintenance will vary depending on the age of the house, the climate, and the former owners’ upkeep. Additionally, a competent home inspector can walk you through a residence’s condition before you sign the agreement.

In turn, the home inspection will give you an idea of what you to expect in terms of costs. Although related costs might be inconveniencing, it’s worth protecting your home’s value.

4.     Insurance

Your home is perhaps the most valuable asset, so you will need to protect it with the appropriate insurance. You’ll also discover that insurance is a requirement if you plan to take out a mortgage for the purchase of the property.

Bear in mind that the cost differs depending on the size, location, and type of property. Even if you hold renter’s insurance, you’ll discover that home insurance is more costly because you’re paying for the capacity to reconstruct your home and substituting your personal possessions.

It’s important to note that insurance costs can increase over time and you may require supplemental insurance, especially if you reside in an earthquake or flood zone.

You’ll also need mortgage insurance if you fund less than 20% of the home. This helps protect the bank financing your loan in case you default on payments.

5.     HOA Fee

If you plan to live in a condominium, these fees are necessary to manage the expenses of maintaining the building’s patios, pools, and landscaping. The fees may also apply in certain neighborhoods.

Final Thoughts

Although purchasing a home is a huge and thrilling decision, make sure you identify all the expenses of homeownership to avoid frustration.

Image: Flickr

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