Buying a new home is a very exciting time, so much that additional expenses can easily be overlooked. While an estimated mortgage payment includes interest rates, homeowners insurance, and possibly mortgage insurance, it does not take into account every expense that comes along with the responsibility of becoming a homeowner. Below is a list of the top 5 expenses people tend to overlook when calculating not only a budget to buy a home but also some reoccurring monthly fees.
Most buyers are aware that there are closing costs involved with purchasing a house. However, not everyone is aware of exactly how much to budget for this cost. I tell my clients to estimate around 3% of the purchase price to allocate to closing costs. So if you are purchasing a house at $500,000 closing costs should be around $15,000. Some lenders may offer different programs to alleviate some of these costs and depending on the deal, your realtor can also negotiate for sellers to pay for some of the closing costs. But in any case, buyers should be financially able to pay all closing costs. These costs include things such as: escrow fees, lender fees, title transfer, title insurance, inspection fees, etc.
If you were previously renting, most likely all of your maintenance problems were handled by your landlord. For all homeowners, it would be a good idea to have a separate savings account or a specific amount of money always saved up incase of any emergency situations. If you negotiated a home warranty into your purchase contract it is usually only good for one year and has limited coverage. So it is always better to be safe and prepared with any maintenance repairs that may arise.
During escrow it would be a good idea to ask the previous owner about their monthly utility bills to get a general idea of what to expect. If they do not want to disclose this information to you, you can always do your own research by calling service providers or visiting your local city website. If you plan on hiring a gardener or yard maintenance service provider you can ask the local neighbors who they use and at what prices they charge.
Windows can easily be looked over and not taken into consideration as a cost. Depending on the seller, they may have customized window curtains or blinds that they may take with them during the move. If the house is a remodel, there is a chance that there may not be any window coverings. Keep this factor in mind when touring homes and make a mental note of approximately how many windows you will need to budget for.
Most lenders will recommend setting up an impound account to collect a certain amount of money on a monthly basis (usually factored into your monthly mortgage payment) to set aside for taxes so that you are not hit with a large tax bill at the end of the year with no money to pay for it. However, what a lot of people forget is that being a homeowner has the benefits of being able to use the monthly mortgage interest as an annual tax deductible.
Becoming a homeowner is a big responsibility, but if you do your research and budget correctly you can enjoy the benefits with peace of mind in your real estate investment!