Buying a home and making your mortgage payment every month is a given cost. You know how much it's going to be one month to the next. But before you buy that house based on just your mortgage payment, consider these five costs to make sure you can truly afford to live there.
1. PROPERTY TAXES - Property taxes vary from state to state and city by city. They can go up and they can go down. Make sure that you are calculating how much you will be paying in property taxes every year. It's always best to have an escrow account and have this amount withheld every month rather than pay a lump sum at the end of the year. To check out property taxes in your area, visit your city's web page.
2. UTILITIES - Very few homebuyers think about utility costs when purchasing a home. When looking at houses, be sure to ask your REALTOR if they can find out how much the average utility bill was for electricity, water and gas in the summer AND winter months. Be sure to know if your appliances and home systems run on all electric or all gas too.
3. HOMEOWNERS INSURANCE - If you are financing your home you are required to have insurance. If you paid cash, it's still a good idea to have insurance. Make sure you have a replacement policy and not a depreciating policy. You want to get full replacement price for today's market to rebuild. If you're in a flood zone, be sure to have flood insurance. Be sure to ask for discounts available from your carrier like alarm systems, bundling insurance products, green features and more.
4. HOME MAINTENANCE - Be sure that you understand the cost of maintaining a home. A/C servicing, yard care, annual gutter cleaning, chimney sweep, leaking toilets and faucets. You can always have a home inspector come out for around $300-$350 to look at the condition of your home and catch items before they get larger and more expensive. When buying a home, ask your REALTOR about having a home warranty included in the offer (usually paid for by the seller). This can cut down on costs significantly when something goes wrong.
5. CLOSING COSTS - When going to the closing table at the title company, be sure you have a clear understanding of what your closing costs will be. Usually there will be lender fees, title policy fees, document prep fees, attorney fees, filing fees, etc.... They add up quickly. Ask your lender what their fees are and also have your REALTOR ask the title company what fees they charge. That way, you can be prepared up front and have that money available at closing. You will receive your closing disclosure three (3) days prior to closing. This will list all the fees you are paying for along with your down payment amount.