Buying a home is a large expense so it’s important to make sure that you can keep up with your mortgage payments once you’ve signed on the dotted line. If you are a first-time homebuyer, you might not be aware of all of the costs associated with buying and owning a home. Here’s a look at the largest expenses you’ll be responsible for when you buy a home.
No matter what type of mortgage you qualify to receive, the monthly payments can be a lot to handle. It’s a good idea not to take on more of a debt than you can handle. Some experts recommend keeping your mortgage payment to one-fourth of your monthly income.
Real Estate Taxes
As a homeowner, you’ll be faced with taxes assessed on the value of your property. Depending on where you live, you might be responsible for school, county, and local taxes. While you are only taxed on a portion of your home’s appraised value, your real estate taxes can reach several thousand dollars in value. This amount must be paid on an annual basis.
Homeowner’s Insurance Policy
In order to safeguard your home against losses resulting from unexpected problems, such as fire or storm damage, you’ll need to obtain and pay for an insurance policy on the home. Depending on the appraised value of the home, you could be looking at a thousand dollars or more for your annual payment.
Private Mortgage Insurance Policy
Homeowners who pay less than twenty percent of the home’s value for its purchase will find themselves facing the need to obtain and pay for private mortgage insurance. This type of policy protects the lender against the possibility of the homeowner’s inability to continue paying on the loan. Nonetheless, the homeowner is responsible for making the payment on this policy.
Owning a home leads to certain expenditures, including utilities (electricity, water, and gas) as well as repairs. Seasonal fluctuations and annual increases in prices can lead to additional financial strain on top of having to pay the mortgage.
Summarizing the Costs Associated with Owning a Home
Anyone looking to purchase a home for the first time should be prepared for several types of expenses in addition to the monthly mortgage payment. Real estate taxes are assessed on the property, and the homeowner is responsible for the bill on a yearly basis. Homeowner’s and private mortgage insurance must be purchased to protect the value of the home against accidental loss or default on the loan. Other costs associated with owning a home include utilities and upkeep.