In my area, houses are once again flying off of the market. Prices aren’t near their 2007 peak, but houses are only on the market for roughly 30 days. If you are looking to buy a new house, there are some unaccounted for costs that you need to consider.
Most mortgage calculators you find online only take into account your monthly payment: principal, interest and taxes. But there are other costs to owning a home that you need to aware of.
Whether you are moving out of a small apartment and into your fist home or you are moving up from your starter home, you will most likely need new (or more) furnishings. If you lived in an apartment prior, you now will have a few more rooms that need to be decorated and filled. Regardless if you turn that second bedroom into a guest room or your home office, you are going to need furnishings.
It can be very easy to get caught up in the home buying process and spend more than intended on new furnishings. After all, you want your new house to be perfect. You need to realize though that to make it perfect takes time. There is no point in buying the first desk you see. You need to look at a few desks to make sure the first one has everything you want. Most of us don’t marry the first person we date. We need to find out what qualities we value and then we decide. Same concept here. Take your time adding furnishings to your house so you can be sure you get a good price for something you really want.
When living in an apartment, you weren’t concerned with any regarding the house. You just called the landlord and hopefully he or she fixed it. Now that you own a house, all of those fixes are your problem. Many of us tend to underestimate how much repairs will actually cost. A new hot water heater will be close to $1,000. Repairing your central air conditioner will be $500. A new roof will be a few thousand.
If you only have $1,000 in your emergency fund, you are one repair away from being in serious trouble. This is why I recommend an emergency fund of close to eight months expenses. You don’t want a broken hot water heater to be your downfall.
With that said, it is important that you know how much it typically costs to repair things around your house. This will help you avoid being scammed by the repairman who over quotes you thousands of dollars.
For most people, taxes are taken into account in your monthly mortgage payment. The problem is that you see what taxes are for this year. It shouldn’t come as a surprise that taxes typically increase each year. So if you are paying $200 month this year for taxes, chances are that next year, you will be paying more. If you escrow taxes each month (meaning they are included in your monthly mortgage payment) you can expect that your mortgage bill will be higher next year unless you pre-pay the shortfall that your mortgage company is expecting. (This is their fancy way of saying how much taxes have gone up and that you owe this amount either as a lump sum to keep your monthly payment the same or they will increase your monthly payment a few dollars.)
Overall, there are many costs that are associated with buying a new house that many do not take into account. By not accounting for them, you are setting yourself up for potential hardships in the years to come. Be smart with your money and learn to think outside the box to save money. Every room in your house doesn’t need to be furnished from day one. Learn basic do-it-yourself repairs to that you can keep your home running in top condition so that breakdowns are a rarity. Understanding all of the costs involved in a new house will allow you as well to stay in top financial condition.