Buying your first home is one of life’s major events. It’s easy to get caught up in the euphoria of the decision and overlook the reality that it costs a substantial amount of money not only to obtain a home, but to keep it and maintain it.
If you are purchasing your first home, there’s a good chance you are coming from a situation in which someone else–your landlord, a property management company or your parents–will be responsible financially for maintaining the property in which you live. It is a good idea to understand that you will be responsible for keeping up your property for a homeowner before you commit to a purchase. Julie Holden, a real estate agent in Austin, Texas, indicates homeowners put aside about 2% of their home’s purchase price to pay maintenance costs, including the purchase of lawn maintenance equipment and home tools, in the first year.
Not only do you need to keep your new residence, but Holden notes that you probably ought to stock it with appliances. Most new houses don’t come supplied with a refrigerator, washer, dryer and other necessities. You’ll be on the hook for at least an extra couple of thousand dollars for those items alone. If you are moving from a smaller to a larger area, you have a choice–abandon the extra space chilly and empty or supply it. Spare beds, dressers, couches and chairs–the listing of furnishings you need, or at least will want, when you move into your first home is endless.
You might need to spring for mortgage insurance when you get a new home. Many first-time home buyers utilize less than 20 percent for a down payment. In this case, mortgage insurance is necessary, as stated by the Department of Housing and Urban Development. Mortgage insurance provides your creditor with security in case you default on your loan. If you are receiving an FHA loan, you are going to cover a 2.25 percent mortgage insurance premium up front in addition to monthly premiums. Homeowners insurance can be required when you get a home. You’ll need proof of a coverage at final. As HUD clarifies, premiums for mortgage and homeowners insurance are usually contained in a monthly mortgage payment.
Though it’s handled different depending upon where you live, you will likely pay property tax on your new residence. The last thing a first-time homeowner needs is a surprise once the bill comes in the mail. In California, thanks to the state’s controversial Proposition 13 passed by voters in 1978, property tax is limited to roughly 1 percent of the assessed value of your home, as stated by the state’s Board of Equalization.
Whenever you choose to make an offer on a home, you’ll typically need to submit”earnest money” with it. According to HUD, real money is a deposit, which range from 1 to 5 percent of the expense of the home, that ultimately gets applied to your down payment or closing costs and is used to show the seller you are seriously interested in the transaction. In case the vendor does not accept your offer, you get your earnest money back.
Obviously, you will need a down payment to buy a home. After the housing crash that occurred in 2008the days of zero down are just about all gone. On FHA loans, your down payment can be as low as 3.5 percent. On a conventional mortgage, expect to pay somewhere around 20 percent for a down payment. Your individual financial situation greatly influences what is required.
Closing costs consist of a string of fees–seemingly arbitrary fees, even to”seasoned” home buyers–you need to cover when it is time to sign the deal in your residence. HUD reports that closing costs include attorney’s fees in addition to a loan origination fee, a survey fee and record preparation fees. HUD estimates that final costs equal about 3 to 4% of your home’s value.