Buying Advice: Don't forget to factor in all the costs associated with homeownership.So, you've gotten your financial situation in order and are ready to buy a house. Do you know how much house your monthly budget can handle?
In this installment of Buying Advice, we'll look at the costs associated with home ownership and give you tips on how to better prepare for those expenses. We'll also check in with the latest housing statistics and answer the questions: "What is a good-faith estimate?" and "Why do I need one?"
Budgeting for your first home purchase
You've probably used a mortgage calculator to get an idea of the price range in which you should be looking. While that might give you a very rough idea of the homes you should consider, it shouldn't be the only budgeting you do, said Kelli Roland, housing manager for American Financial Solutions, a nonprofit credit-counseling agency.
In addition to your down payment, there are other expenses to consider, both at closing and after your moving truck pulls up, including:
- The upfront cost of a home inspection ($300 to $400).
- Closing costs, including appraisal, loan, title and lender fees. The average closing cost on a $200,000 mortgage is $3,754, according to Bankrate's annual survey of closing costs.
- Monthly homeowners-association fees.
- Moving costs.
- Maintenance costs; credit counselors suggest putting aside 1% of your home's value annually to make needed repairs.
- Higher utility costs.
The bigger gas, electric or water bills that come with a home often take new homeowners by surprise, Roland said. She suggests calling your local utility company before you buy to get an idea of what the average bill is in your area.
Roland and other credit counselors also suggest that before you purchase, you practice making mortgage payments, transferring the difference between your current rent and the expected mortgage bill into savings. Roland did this when she bought a house in 2011, putting an extra $700 a month into a savings account.