The process of becoming a homeowner is very exciting for first time buyers. With this excitement, however, comes responsibility. For instance, there are many costs associated with homeownership, such as lawn and home maintenance, property taxes, and homeowner’s insurance, that new homeowners did not have to worry about when they were renters. The key to managing these expenses is determining how much you will need to budget before you commit to purchasing a home. Here are four important homeownership costs first time buyers should expect to pay.
- Property Taxes: Property taxes vary greatly across the country, so it’s important to look at your specific area’s property tax rate when determining what to budget. You will not, however, receive a bill at the end of the year for these payments. Instead, your mortgage lender will collect one-twelfth of the amount with each mortgage payment, and they will pay your taxes for you when they are due. Your local lender can show you what your future payments, including taxes, should be when you buy a home—this will prevent any surprises when it comes time to pay!
- Home Maintenance: Buying a home is much different than renting an apartment, as you are now responsible for covering all of the repairs and maintenance expenses yourself. This could include replacing appliances if they break, repairing leaky roofs or windows, and weed whacking the yard. The average homeowner will spend roughly 1.5% of their home value on home maintenance per year. Keep in mind that if your home is a “fixer-upper”, you will probably need to allocate more towards repairs and maintenance. Although these maintenance costs may sound pricey, these repairs will actually pay off in the long run; if and when you decide to sell your home, the property will ultimately have a higher value!
- Additional Furniture and Appliances: Because your new home is likely going to be larger than your apartment, you are going to need to buy new furniture to fill up the space; however, you don’t need to spend a lot of money buying stylish furniture pieces. Some home stores offer highly discounted fixtures and big-box retailers often have low cost options that are relatively trendy. You will also need to leave room in the budget for new appliances (if they are not included with the house).
- Emergency Funds: When purchasing a home, it’s very important to have some reserved funds that can be used in case of an emergency. Six months’ worth of emergency money is a good cushion to save up before purchasing a home—but it isn’t necessary! In fact, there are many homeowners who have happily owned their homes for over twenty years without this six-month cushion. Any amount will do!
Keep in mind, most landlords typically account for these costs, as well as build a profit, by charging their tenants—so renting is actually more expensive than paying these homeowner costs on your own! In the end, buying a home is an investment that will grow with time. If you want to learn more about the benefits of homeownership, or how you can plan for these new costs, contact one of our loan officers today!
