You’ve decided to buy your first home. You’ve probably crunched the numbers on your monthly mortgage payment. After all, you need to know what you can afford. You’ve met with a lender and received pre-approval up to a specific amount. You know your down payment and all associated insurance fees you’ll be paying. While these are essential numbers you need to know when making the plunge into home ownership, make certain that you’ve considered all the other potential costs you might have overlooked. Below are the not so top-of-mind expenses that come with buying and owning a home. Don’t forget to consider these financial responsibilities before you go full force on your search. Being prepared will create a smoother transition to home ownership.
Closing Costs. The price of getting a loan usually comes with a cost. That cost depends on your lender, whether you are paying for points to lower your mortgage rate, and even the type of loan you’ve chosen. It’s possible to negotiate a purchase contract where the seller pays all or some of your closing costs, but that’s totally up to the seller and probably only likely if they’re worried a better buyer won’t come along soon. Closing costs can vary widely but the average is between $3,000 and $4,000.
Property Taxes. Your lender might require that you escrow your property taxes. This means your monthly mortgage payment includes a portion reserved for these taxes to ensure the money is available when your county taxes are due. But if you don’t escrow your taxes, you’ll need to ensure you set aside that money yourself for that annual or semi-annual bill. Property taxes are public record, so ensure you know what the taxes are on any home you’re planning to buy before you make an offer.
Roofing and HVAC. Because these two items are so essential to the function of your home and are typically expensive to replace, make sure you’ve done due diligence during inspections of these items. When you’re under contract, you’ll be advised to have a home inspection. The heating/cooling system is a normal part of this inspection. But if your inspector doesn’t have a clear picture of the systems’ condition, he or she may suggest you hire an expert for further recommendation. Typically, a full roof inspection isn’t provided by your average home inspector. Hire a roof expert during your inspection period if you’re concerned about the appearance of the roof and its age. The average cost of roof replacement is around $12,000, depending on the size of your home and type of shingles. The average cost of a new gas furnace is around $2,500-3,500.
Appliances. Most buyers like choosing a home where major appliances are either new or have a lot of life left in them. Unlike your days as a renter, if something happens to a refrigerator or stove, you’ll be the one to find a service person and pay for the repair, or shell out the cash to replace them. An average stove and oven range starts around $600 these days, a dishwasher starts around $500, and a refrigerator around $1,000. Prices go up with added design style and functionality. Because repairs and replacements are costly, it will serve you well to invest in regular maintenance of these items to prolong the life of your appliances.
Landscaping. If you have a yard, you’ll need to care for it seasonally. Expect to cut grass in the Midwest at least once a week in the summer and maybe twice a week in the spring. Trimming hedges and edging around walkways also require equipment, time and effort. And if you have mature trees in your new neighborhood, plan to rake leaves in the fall. A new lawnmower and an assortment of other yard gadgets probably weren’t the top-of-the-list purchases you considered for your new home, but they’re usually a necessity. There are plenty of other landscaping costs you can choose to invest in, but how much you spend is up to you and your tastes. Keeping up curb appeal should be viewed as a necessity for maintaining your home value.
Decorating and Furnishing Costs. Once you move in, you’ll want to make your new home your own. While you probably have furniture and decorations already, sometimes you need something different or new to fit a specific space. For example, you might need a custom set of blinds or curtains for your master bedroom. First time buyers also frequently find that they need more furniture to fill more rooms. Create a budget and timeline for yourself to “fill in” all the essentials. There’s no rule everything has to happen as soon as you move in. This is the fun part of home ownership. You get to choose what you do with the walls and décor.
Regular Long-term Maintenance. Owning a home can create enjoyment and security. Beyond a place to live, it is also a place to maintain so that you can keep benefiting from it year after year. Investing in someone to service your air conditioner each summer and your furnace each fall will ensure that equipment runs its full life (and you won’t be too hot or too cold when you need comfort). Hiring someone to clean out your gutters after all the leaves have fallen (if you can’t do it yourself) can prevent a basement leak or downspout failure. Repairing broken handles, railings, and crumbling cement steps prevent injury and keep your home in a functioning state. Also updating cabinetry, flooring, or countertops keeps your home modern and appealing and increases value for when you sell. All of these kinds of maintenance steps are ongoing costs that you should consider when you buy a home. Remember that costs can be budgeted and spread out over the long term for affordability and practicality.