Planning For Affordable Homeownership
You’ve been approved for a mortgage, paid the closing costs and downpayment. The seller is handing over the keys.
You’re an official homeowner. That comes with rewards, but also responsibility.
Unlike the apartment you’ve rented throughout college or afterward, you will have ownership costs such as lawn and home maintenance, property taxes, and homeowner’s insurance.
But these expenses don’t have to make you “house-poor.” A budget can help prevent a situation in which you are spending an outsize portion of your income on your home.
The key is knowing how much to budget for costs you didn’t experience as a renter. Fortunately it’s not difficult to estimate additional costs of owning your new home.Verify your new rate (Jun 3rd, 2020)
One In Three Buyers Are Transitioning Renters
According to the National Association of Realtors, 30% of buyers have never purchased a home before.
If you wonder about your total monthly bill as a homeowner, you’re not alone. Nearly one-third of buyers have never owned before.
A mortgage payment is just a part of overall homeownership costs. When looking into homes, it’s good to keep the following expenses in mind.
- Property taxes
- Home maintenance
- Furniture and appliances
- Emergency Funds
Knowing about the cost of living before you purchase your first home can save you the stress and anxiety in the long run.Verify your new rate (Jun 3rd, 2020)
4 Homeownership Costs To Plan For
1. Property taxes
Property taxes vary widely across the country. Look at local listings, which detail annual property tax for your area.
Looking at one locale as an example, Cincinnati’s property tax is 1.774%. If you’re looking for a home in the Cincinnati area you’ll want to save 1.774% of your home’s value for property taxes. For example, if your potential home is around $100,000 you will pay nearly $1,800 per year in taxes.
But you won’t get a bill for this amount at the end of each year. Rather, your mortgage lender will collect one-twelfth of the amount with each mortgage payment, and pay your taxes for you when they are due.
Your lender will show you your total future payment including taxes when you apply for your mortgage so there are no surprises.
2. Home maintenance
Buying a home is not like renting an apartment. As the homeowner, you are responsible for any wear and tear damage done to your home as well as lawn care. This could include replacing
appliances if they break, repairing leaky roofs or windows but also mowing and weed whacking the yard.
The average homeowner will spend roughly 1.5% of their home value on home maintenance per year. So if your home costs $100,000, you will pay $1,500 in maintenance expenses annually.
The 1.5% estimate is only if you have to fix the roof, foundation or an appliance in the home; but it’s good to keep in mind when looking at a home. Does it look like a “fixer-upper” or is it move in ready?
3. Furniture and appliances
As a homeowner, you have complete creative control on how you want to furnish your home. You can go all out and buy brand new furniture or you can shop at thrift shops and yard sales.
Be creative. You don’t have to start out with the best furniture money can buy. Maybe one of your family members hasan extra couch or dining room set they want to get rid of.
And, there’s nothing wrong with a first home that is completely furnished by Craigslist.Verify your new rate (Jun 3rd, 2020)
4. Emergency funds
Having reserved funds in case of an emergency is also something to take into account when looking for a home. After purchasing the house will you have enough in your savings to make due for a couple months if something happens like getting laid off or becoming ill? Having six months worth of emergency money is a good cushion to have going into the purchasing of your home.
Don’t worry, having a six month reserve is not required in order to purchase a home. In fact, there are a lot of 50 year olds who have owned a home for 20 years who don’t have a six month cushion. Having any amount of savings is a good idea when looking for your first home.
Property taxes, furnishing, home maintenance and lawn care as well as potentially having reserved funds are all apart of the cost of living. When purchasing your first home remember that you will not only be making mortgage payments.
What are Today’s Mortgage Rates?
With the right planning, your homeownership experience can be enjoyable. It doesn’t have to be a stressful proposition. Becoming “house-poor” is unnecessary.
Get today’s live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.Verify your new rate (Jun 3rd, 2020)