First-time home buyers frequently forget about costs that can quickly overwhelm their budgets. While some of these oversights are minor, others can quickly become disastrous. To easily be able to afford a mortgage and enjoy the process, follow this First Time Home Buyer Guide to the costs of home ownership.
Real Estate Taxation
While rates vary by location, they can be high. For instance, if the home is valued at $200,000 and it’s taxed at 1.8%, the monthly payment would be around $300. Location is important in the real estate business, for more reasons than one.
Air conditioning, heat, internet access and electricity costs can add up quickly. The average American spends roughly $300 per month on utilities, and some areas’ averages are even higher. Add in more fees for new cable or electrical outlets, and the cost rises significantly.
The average homeowner pays about $800 in insurance premiums, but the expense can vary by location and claims history. Like other kinds of coverage, however, customers can save by comparing rates among competing companies. Umbrella policies protect homeowners when a lawsuit judgment exceeds a basic policy’s limits, and they’re relatively cost-effective because homeowners rarely use them.
First time home buyers also have to think about the cost of furnishing the home with tables, chairs, beds and curtains. Advance budgeting can prevent such items from becoming a budget-buster. Figure out how much it will cost to furnish the home over the next two years and divide that figure by 24 to determine the effect on the monthly budget.
Maintenance and Repairs
New home ownership comes with sudden repair and replacement costs during the first few years. It’s a good idea to budget at least $50 to $75 per month during the first year. If nothing comes up and that money isn’t needed, use it as an emergency fund.
While the list goes on, these are some of the most common costs of home ownership. Even with today’s mortgage affordability, these costs can add hundreds or even thousands to a new homeowner’s budget. With careful consideration of all these expenses, a person’s first home really can be their castle.
Still have questions after reading our first time home buyer guide on budgeting? Contact Tony Raffin!