Buying a house can be an exciting prospect, but detrimental to your finances if something goes wrong or is overlooked. Home buyers can find themselves house poor if any of the following happens: First-time home buyers may simply not plan beyond the money needed to buy a house – the down payment and closing costs are just the start of the lifelong expenses of owning a home. Meanwhile, the costs of owning a home can be significant, and you should include them when you’re creating your house buying budget. More than the monthly mortgage payment goes into buying a home. Consider these costs of owning a home before moving forward with a home purchase. If you’re moving from an apartment or condo to a single-family house, you may be shocked when you get your first utility bill, which may be higher than you’ve been paying for a smaller home. You should also factor in costs like increased transportation expenses or services like landscaping or snow removal. There may also be trash pickup services to pay for, and you may need to purchase garbage cans as well. If you have a lot of yard space, you’ll need items like shovels, rakes, wheelbarrows and household tools for basic lawn maintenance and repairs. It adds up quickly. Although these are usually included in your monthly mortgage payment, along with homeowners insurance in an escrow account, one of the important things to realize is that your mortgage lender is preapproving you based on an estimated initial property tax. This is one of the biggest items that changes after you buy a home. Your home’s previous owner disclosed what they’d been paying based on the home’s assessed value. If you paid significantly more than their assessed value, your taxes rise accordingly because your purchase price becomes the new assessed value of the home. Visit the website of the property taxing authority where your new home is located to find out exactly what your tax bill will be after purchase, whether there are any property tax rate hikes on the horizon and how often property values are assessed. If the home you’re considering is located within a homeowners association (HOA), you’ll have to pay HOA fees in addition to property taxes and homeowners insurance. Unlike these other expenses, though, HOA fees aren’t included in an escrow account and aren’t part of your monthly mortgage payment. Because of this, they can be easy to forget until they become due. They also tend to rise over time. There can also be special assessments to meet major maintenance costs. Check the homeowners association meeting minutes for at least the past year to see if there are any plans for major maintenance on the horizon. If you fail to stay current on your HOA fees, you may face penalties and interest on those fees. If you don’t pay, eventually you’ll have a lien placed on your property, which will make it difficult to refinance or sell your home. Something is eventually going to break in your home. While it’s impossible to say when, you can make some educated guesses based on how old the home is and when major systems, the roof and any included appliances were last replaced. Maintenance costs are often between 1% – 3% of the purchase price of your home each year. Whether you can expect to be at the low or high end of that range typically depends on the age of your home. If you’d prefer to have a stable home maintenance cost that handles unforeseen contingencies, you may want to consider a home warranty. If you’re approved for a mortgage based on your monthly income, you could struggle to afford your monthly mortgage payments if you lose your job. Unless you can find another job quickly, your finances could take a huge hit. Your circ*mstances can change outside of your employment as well. The costs of living in your area could go up suddenly, or the interest rates on your credit cards could rise. For these reasons, it’s important you try to leave room in your budget for emergencies, raising costs and potential loss of income.They Underestimate Their Homeownership Costs
Homeownership Costs
Property Taxes
Homeowners Association (HOA) Fees
Maintenance Expenses
They Experience A Change In Circ*mstances
What Is House Poor? (2024)
Table of Contents
They Underestimate Their Homeownership Costs
They Experience A Change In Circ*mstances
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