Homeownership is part of the American dream. It’s one of the largest investments most people will make during their lifetime. There are many expenses that come with buying a home both initially and throughout the time you own it. Make sure you have the funds in place to avoid losing your home.
The Buying Process
You have a realtor and together you have found the home of your dreams and it’s within your budget. That’s terrific. In order to avoid paying PMI insurance, you’ll need to have 20 percent of the purchase price on hand to offer as a down payment. Depending on the purchase price of the home, this can cost you an additional two hundred dollars or more each month. Then there’s the home inspection and closing costs, which, on average, are upwards of 6,000.00 or more. You’ll also need money for your attorney, property taxes and homeowner’s insurance. If you don’t have this money already, it’s best to wait a few months or a year or two until you do.
If you decided on purchasing an older home due to the attractive price, you may save money initially. However, in a year or less, especially if the home needs work, you may end up with a costly repair that comes up seemingly out of the blue. Many people who buy a home simply don’t have funds available to cover these surprise expenses just a few months after the purchase. As a result, you may end up borrowing money from a family member or taking out a short-term online installment loan to cover the expense. Before considering owning real estate, it’s important to have savings set aside for these types of emergencies.
Running a Household
In addition to the mortgage payment, you’ll also have overhead which can include household expenses such as electricity, gas, water and garbage pickup. These can run an additional three hundred dollars or more each month. Plus, you’ll need to change out air filters, replace light bulbs and other general household items. Make sure that, when you figure out your budget, you include these expenses.
If you go into a home on a shoe-string budget, chances are you won’t have any funds available to perform regular maintenance. This can include things like cleaning out the gutters, servicing the house’s heating and cooling system and an annual pest control inspection. Without taking care of these types of items each year, you may end up with a major problem that will cost you dearly.
A home on its own can consume nearly a third of your net income. If you add pre-existing debt to it such as a car payment, several credit cards, and a student loan, making ends meet may become a serious problem. The best way to avoid faltering on your mortgage is to reduce your debt prior to purchasing a home. There are some lenders that can get you into a home for less, but consider carefully all of your debt ahead of time to make sure that you take in enough to cover all the expenses, comfortably.
Taking on a Second Job
If you find that you are a bit short when you add up all the expenses, and you still want to buy a home within a year, prepare for it. Sell off items you don’t need, take on a part-time job to earn some extra money to pay down debt and establish savings for after you buy the home.
The Bottom Line
You have a dream of owning a beautiful home and that’s a good thing. However, it’s important to remain level-headed and factor in all the costs that come with homeownership. This way you’ll be able to realize your dream without regret.