I always tell my buyer clients up front that there are a number of costs associated with Home Ownership that people should keep it mind when they are planning to buy a home. Potential Home buyers may take a look at their projected monthly mortgage payment and feel like it’s cheap — especially if they’re used to paying skyrocketing rental costs. But buyers need to be prepared that the budget for a home is much more than just a monthly mortgage payment.
I have made a list of these potential costs that you should definitely include in your budget before moving forward!
1. Property taxes: Property taxes average about 1 percent of the home’s value. It will vary considerably depending on location. For example, the median property tax in Alabama is $538, while in New Jersey, taxes are $7,335.
2. Insurance: The cost of homeowners insurance will depend on numerous factors, such as the size of the home and its age. Some lenders may require extra insurance, such as flood protection.
3. Maintenance and repairs: Home owners may want to budget an extra 1 percent of their home’s value per year for home maintenance projects.
4. Furniture: If they need to outfit a new home, home owners will want to budget for furniture.
5. Closing costs: Closing costs can range anywhere from 1 percent to 5 percent on the sale price of the home.
6. HOA fees: Some neighborhoods or condos require home owners to pay an HOA fee to cover the maintenance of common areas.
7. Mortgage insurance: When borrowers have less than a 20 percent down payment on a loan, lenders often require them to then buy mortgage insurance, which will be added to their monthly payment.
8. Landscaping and lawn care: Equipment and the cost to maintain a lawn or pay for landscaping services is another additional cost to figure in.
9. Pest control: Home owners may need to pay several hundred dollars per year for pest control.
10. Inspection and appraisal costs: A home inspection can be smart prior to closing to see if any hidden house problems lurk. The inspection may cost $500 or more, depending on the size and location of the home.
Source: “10 Hidden Costs of Homeownership,” The Motley Fool (April 3, 2016)