Planning for the hidden costs of buying your first home
Owning your home can be a great deal compared to renting – especially if you plan to live in your home for a long time or your local rental market is comparatively expensive. However, if you’re new to owning a home, you may not realize all the costs that are incurred in addition to your mortgage payment. Here are some expenses you should anticipate before buying and owning your home.
Down payment and closing costs: typically, you can expect to pay about 2 to 5 percent of the purchase price of your home in closing costs, and down payment percentages vary greatly depending on your financial situation and the type of loan program you choose
Homeowner’s insurance: your lender will likely require you to obtain homeowner’s insurance for your home, and even if they don’t, it’s a good idea to have anyway
Taxes: owning your home means you’re the one who’s responsible for paying your property taxes, though these may be defrayed by a mortgage interest deduction
Utilities: rental properties are known to include at least some utilities in the cost of rent, but when you own, you’ll likely have to pay most or all of these bills directly
Maintenance: when there’s no landlord in the picture, repair, replacement and upkeep costs for your property fall on you – a popular rule of thumb is to set aside one percent of your home’s value a year for these expenses
Association fees: if your property is part of a condominium, cooperative or homeowner’s association, you’ll likely have to pay them monthly dues
With some careful consideration of everything homeownership entails, you can ensure that making the move to owning is as smooth and rewarding as possible.