Purchasing a home is no small matter; in fact, it’s likely going to be one of the largest financial decisions a person makes during their lifetime. With buying a home already being so expensive, many people forget to account for the ongoing costs after buying a home. If you’re purchasing your own home, here are a few costs you’ll want to account for in your new budgeting.
Home Insurance
While many renters have insurance policies for their belongings, homeowners’ insurance will likely be a new experience. Home insurance will likely demand more of your budget but is a necessary cost to factor into a monthly budget when buying a home. The cost of your insurance will vary by the property and the level of protection you wish to purchase, but it typically costs around 0.5% of the home’s purchase price. If home insurance would make owning a home too expensive, you may want to rethink buying your home until you can afford it.
Property Tax And Community Fees
Similar to home insurance, you’ll want to make sure you can afford the property taxes and community fees before you commit to an offer. Property taxes are usually fairly easy to budget and plan for, as most property tax information is now available online. Community fees can also add to monthly budget requirements. While not every home is located in a neighborhood with a community association, it’s worth looking into in advance. U.S. homeowners paid approximately $88 billion in assessments toward community associations in 2016. Do your research before committing to a neighborhood for a home purchase, as these fees and costs can vary greatly even from block to block.
Home Projects and Improvements
While many homes on the market right now are move-in-ready, not every purchase is going to involve a move-in-ready home. Odds are, if you’re moving into an older home, you’ll need to at least make a few repairs before you can move in. Sometimes, the seller will help cover the costs of repairs, but there’s no guarantee your seller will be willing to help. If possible, try to account for some of the necessary renovation costs in your initial purchase price considerations. Every bit of maintenance should count when you’re working out an ongoing project or renovation budget. For example, if you want to update the landscaping around your home, consider how much it will cost to maintain. A healthy grass lawn requires 55 gallons of water per square foot every year.
Emergency Expenses
Finally, when budgeting for your home purchase, remember that emergencies can and unfortunately do happen. It’s difficult to budget for the unknown, especially when also making a large purchase like a home. However, having funds set aside for emergencies or unexpected situations is essential. Major life changes, like a move, could become even more challenging if an emergency occurs at the same time. Before committing to a home purchase and move, make sure you’ve got enough money set aside to cover emergency situations that could happen around the move. More than one million Americans injure themselves on stairs each year; if you fall during the move-in you want to know that the accident won’t bankrupt you in combination with your home purchase.
Purchasing a home is incredibly stressful, especially when you’re coordinating your home buying finances. Being aware of some of the hidden costs of homeownership can help you prepare and protect your financial wellbeing. What costs of buying a home surprised you?
