What It Costs to Own a Home
Few things are as exciting as buying your first home. But before you become a homeowner, it's important to make sure you have a clear understanding of all of your monthly expenses so that you can determine what you can comfortably afford.
Remember, you're the landlord now, and that means you need to cover everything from the town taxes to fixing a leaky roof, including those unexpected emergencies.
Let's put together a budget so you can get a better idea of how a mortgage payment could fit into your overall financial picture when you consider your income, your current debt (like credit cards and auto loans), and your savings.A Homeowner's Budget
Here's a rundown of typical expenses a homeowner needs to budget for, in addition to monthly mortgage payments.
Insurance and Taxes: Right off the bat, homeowners have two big expenses they need to prepare for - homeowner's insurance and property taxes. Both of these are usually included in your monthly mortgage payment through an escrow account, which might be required by some lenders.
An escrow account works like this: each month, you place your prorated property tax and homeowner's insurance payments into a holding account that's managed y your lender. When these bills are due--usually once or twice a year--your lender makes the payments for you by withdrawing the appropriate amounts from the escrow account. If you don't have an escrow account, it's a good idea to put some money away each month in a savings account to cover these payments.
To help you budget, according to the National Association of Insurance Commissioners, the average homeowner's policy costs about $820 a year.
The second item is property taxes. To estimate the property tax before you buy a home, call your county tax collector office or visit their website. They should be able to tell you the property tax rates that are applicable to your area.
Keep in mind that taxes and insurance are determined, in part, by where you live. They will also fluctuate based on the size and value of your home.
Utilities: Utilities are next on the list. Be prepared to pay for everything from electricity and gas to water. Even if you paid this on your own as a renter, don't be surprised to find your bills are now higher if you're moving from, say, a one-bedroom apartment to a four-bedroom home.
Outdoor Maintenance: Coming in next is outdoor maintenance. While you may expect to pay for your lawn care, you may not be aware that garbage pick-up, snow removal and sewage are often part of a town's fees.
Indoor Home Maintenance: Finally, there's indoor home maintenance. This is the biggest unknown expense for homeowners. That's because you have to cover all of your own repairs, as well as the basic maintenance every property needs.
Unfortunately, you never know when the roof will start leaking or an appliance will break. But you can anticipate and budget for necessary home upgrades. One way to get a better handle on these costs is to tag along during the home inspection and ask the inspector when he thinks key home components, such as the boiler or furnace, will need to be replaced.
When you think of buying a home, keep in mind how much you can afford with all of these costs having been given consideration. Buying within your means will enable you to make the most of home ownership and enjoy it to the fullest.
Interested in learning more about the home buying process? Here are some AOL Real Estate guides that might help: