When it comes to owning a home, you have probably prepared yourself for the initial down payment and the mortgage payments. There are a number of other expenses you should be planning for as you begin looking for your first home that you may not always hear about right away. Here are 5 costs to keep in mind as you begin the home-buying process:
1. Home maintenance
Repairs, renovations and maintenance are a big part of home-ownership. It is important to plan for annual checkups and repairs on your home, as well as be prepared for those unexpected maintenance surprises. Many suggest that homeowners should set aside 1-4% of their home’s purchase price aside into an account specifically for home maintenance. If your home cost $300,000, set aside $3,000 or more each year, whether in one large deposit or small deposits throughout the year.
2. Property taxes
Property taxes are typically paid to your municipal or local government, county or state to fund public works, government worker wages or public school boards. You can expect to pay property taxes as long as you are owning a home, and they are assessed based on the current value of your home, and can change over time to reflect your home’s increase or decrease in value. Property taxes can also vary depending upon the region, so you should always investigate the property taxes in the area you’re looking to buy.
3. Home insurance
If you have rented in the past, you have probably paid for renter’s insurance, which primarily covers the cost of your contents in the even of a fire or natural disaster. With homeowner’s insurance, you are also covering the value of the physical structure of your property in addition to your possessions. Home insurance will cover the cost of remaining mortgage or costs to rebuild or repair a home in the event of a disaster. Insurance policies offer different levels of protection and coverage, and premiums can vary greatly.
4. Real estate and legal fees
The act of buying or selling a home comes with costs. The seller is generally faced with paying the real estate agent fees, which typically come in the form of commission. Commissions are negotiable, but tend to run about 6%. Also, both buyer and seller must pay legal fees to cover the transfer of title.
5. Homeowner association fees
Some developments charge a Home Owners’ Association (HOA) fee or condominium fee. These fees will cover external building maintenance and landscaping costs for common areas. This association fee will minimize the cost of any home expenses that are covered by the fee, but it will not cover internal maintenance costs associated with your home or unit. If you intend to purchase a home or unit within an HOA, you should set aside some money to cover such unforeseen expenses associated with the maintenance of their communal property.
We break down these costs not to intimidate you from buying a home, but rather to help you prepare for the process so you are not hit with any unexpected expenses! Buying a home is an exciting process and when you work with a Fazendin agent, you are getting a partner throughout every step of the buying process. Give us a call if you’re ready to take the next step!