Costs of Ownership
Home ownership is a rewarding experience, but whether you’re a first time home owner or an experienced one it’s important to keep in mind that once you’ve made it to settlement there are still costs involved that will have an impact on your affordability.
Once you tally the costs of the items below, you may need to adjust your price range accordingly. By taking these in consideration, your buying transition should prove to be smooth and financially comfortable!
1. MORTGAGE COSTS
Most buyers will require a mortgage. Your lender will work with you to decide on an affordable monthly price point which will also help in determining the price of home you can purchase. Your Mortgage costs can vary significantly depending on the loan you chose and the interest rate you receive. Today’s most common loans include:
*Fixed Rate ~ These are conventional loans with fixed, stable interest rates for the life of the loan, usually 30 and 15-years
*Adjustable Rate ~ Adjustable Rate Mortgages (ARMs) start with a low rate for a specific period, then fluctuates based on the market conditions. Arms are better suited for borrowers who want to stay in their homes for shorter periods, such as eight years or less.
*FHA ~ The Federal Housing Authority (FHA) secures the loan, which is generated by a mortgage lender. FHA loans are best suited for First Time Homebuyers, as only a 3.5% down payment is required. Borrowers must pay mortgage insurance for their FHA loans, which generally carry attractive mortgage rates and less stringent guidelines.
*Jumbo ~ These loans are for buyers who must borrow more than conventional limits set by Fannie Mae and Freddie Mac – $417,000 for most of the country, and up to $729,750 in higher-priced markets. The interest rate is generally higher because there is more risk to the lender.
*Homeowner’s Insurance ~ The value of your home needs to be insured for occurrences such as Fire, Theft, Flood, more. Shop around for the best price and keep in mind that the costs for these as well as any claims may make the price go up.
* Private Mortgage Insurance (PMI)~ If you put down less than 20% on a mortgage, you’ll need to pay PMI, which protects your lender against a potential default on the loan. PMI generally runs up to 0.75% of the loan amount, depending on your loan to value and credit score.
3. PROPERTY TAXES
Property taxes can significantly raise your monthly payments. They can change from township to township, and depend on various local factors. A home is typically taxed on its assessed value. Make sure when shopping, that you ask your Realtor to show you what the previous owner paid so that you have a general idea of what you’ll be expecting to pay.
Utility expenses are unavoidable. These include water, gas, and electricity. They may also include your optional luxuries such as Cable and Internet bills. Most homes on the Mutli-List will have a utility sheet available as an attachment, be sure to take a look at those so that you can estimate those into your monthly costs.
5. UPKEEP AND UPGRADES
From the inside out, there will be necessary upkeep and maintenance issues that will need to be attended to. Reserve time and money for such things including general curb appeal landscaping, flooring, appliance and roofing needs that may arise. These things tend to “just happen” and it’s never a bad thing to be prepared!