8 Overlooked Costs of Homeownership
Along with a mortgage, there are additional costs associated with homeownership that are sometimes overlooked. So, before you begin searching on ahrn.com, the Department of Defense–sponsored housing referral site, do your research and make sure you are aware of expenses beyond the mortgage that you will incur before and after you buy. Here are eight overlooked costs you may forget about when you’re looking to buy a home:
- Home & property maintenance. This includes seasonal cleaning of gutters, roof repairs, and lawn care. Depending on where you live, it can cost anywhere from $5,000 to $8,000 a year to maintain a property.
- Inspections & Appraisals. Advantage Credit Counseling Service in Pittsburgh, PA says that inspections, appraisals, and earned money deposits (a check the buyer gives to the seller to show their offer is serious) can cost upwards of $2000 or more.
- Down payment & closing costs. According to Advantage, a 5% to 20% down payment of the sale price in cash is typically needed in order to qualify for a conventional loan. Closing costs are generally 2% to 5% of the purchase price of the home. For a $200,000 home closing costs can anywhere between $4,000 and $10,000.
- Utilities. If you decide to purchase a home, you will be responsible for all the utilities – water, electricity and gas (if applicable), as well as cable service, if you choose it. For a 4 person household, utilities can be as high at $500 a month.
- Home Insurance. Will you be able to afford flood, hurricane and fire insurance? Since homeowners insurance doesn’t always cover flooding and hurricane damage, if you live in an area prone to these natural disasters, you would be wise to get adequate insurance, but these costs also add to your monthly expenses.
- Home Owner Association (HOA) fees. If the community you live in has a homeowners association, and you want to reap the benefits of being a member, you will have to pay a fee to do so. And while being a part of the association may help you as a homeowner, these fees only get higher each year, they never decrease. Also HOA fees are generally not tax-deductable since they are not mandatory.
- Furniture. A new home has to be furnished, which can add up if you plan to buy everything new. Make sure you budget this expense into all other costs.
- Resale costs. This is especially important for servicemembers who can receive transfer orders at any time. According to Lisa Gibbs, writer for MONEY magazine, you should commit to live in a home for at least 5 yrs. Otherwise, transaction costs mentioned above aren't worth it. Be sure that in the event you are reassigned, you can afford to continue paying your mortgage along with other expenses involved with deployment and PCS. The housing market may not always be good, and you don’t want to ever get in a foreclosure situation.
The most important thing is to be realistic. Make sure you save enough money that will cover costs associated with homeownership, and purchase a home within your financial means. Don’t purchase a $500,000 home if you can only afford one that is $250,000. Begin saving now, and if you do buy a home, set up an emergency fund for costs you’ll have after you move in.
Saving for a home? Take the Military Saves Pledge and choose “home” as your savings goal to receive advice and motivation from Military Saves.
- Published: 12 June 2014