Key takeout
A mortgage is not the only cost. Taxes, insurance and maintenance may be added. Be prepared for ongoing expenses such as property taxes and homeowner insurance. I save money every year for repairs and maintenance. Don’t forget to pay advance fees such as utility, HOA fees, and closure fees. Budgeting for these costs has helped you save financial stress later.
Buying a home is an exciting milestone and is probably one of the biggest purchases you’ve ever made. But it’s here. Owning a home comes with ongoing costs that are not always obvious at first.
If you are thinking about buying it, it is important to understand the cost of owning a home. This will allow you to be caught off guard later and budget accordingly. This Redfin article will show you the costs of buying a home, whether you’re in Seattle, Washington or Houston, Texas.
It’s more than just a mortgage
So how much does it cost to buy a house? Most people think that the biggest cost of homeownership is their mortgage payments – and yes, that’s a big deal. But that’s just the beginning. There are many upfront costs you’d like to know and we’ve listed some of them.
Advance payments for buying a house
Here’s a breakdown of what you’re expecting:
1. down payment
This is your biggest advance cost and will straighten towards your home ownership (subsidy). Most buyers placed between 3% and 20% of the purchase price. A $300,000 home is a $9,000-$60,000 home. The more you put it in, the less you will borrow (the lower your monthly payments).
2. Evaluation fee
Your lender wants to make sure the home is worth what you are paying for, so they need a rating. This usually costs between $300 and $700 or more, depending on your location, size of the home, and the complexity of the property. This is a one-time fee, usually paid before closing.
3. Testing fee
Testing can help you discover structural issues, pests, or outdated systems before committing. A basic home inspection usually costs between $300 and $600, but extras, such as checking Radons, molds, or sewer lines, can add between $75 and $500. It’s an option, but I highly recommend it.
4. Closure costs
These are the ultimate costs to formally make your home yours. These include loan origination fees, title insurance, taxes and more. Expect to pay around 2% to 5% of the home’s purchase price. That $300,000 home costs between $6,000 and $15,000 when closed.
Ongoing costs of owning a home
Now that you’ve covered your advance costs of buying a home, don’t forget there are also ongoing expenses that require a budget. These are the recurring costs associated with homeownership. Here’s a quick summary of what you should expect:
1. Fixed Asset Tax
These vary widely depending on where you live, but the rule of thumb is to expect 1-2% of your home’s value every year. For a $300,000 home, that’s $3,000-$6,000 a year. And yes, they usually go up over time.
2. Homeowner Insurance
Your lender needs it, but even if you don’t, you want it. Insurance protects you from major losses and disasters. Average costs run between $1,500 and $3,000 a year. That number depends on your home location, age, and what type of coverage you choose.
3. Maintenance and repair
Spoiler alert: Something will break. Even if not, the home needs to be maintained regularly. Experts suggest budgeting 1-3% of your home’s value each year for repairs and maintenance. Again, a $300,000 home costs between $3,000 and $9,000 a year.
4. Utilities and HOA Fees
Water, gas, electricity, garbage, internet – if you have a community, you will be charged a hoa fee. These costs can vary widely, but don’t forget to consider them as they are part of the monthly reality.
Tips for managing home ownership costs
Build solid emergency funds to handle surprises (as something comes up). Shop for the best insurance premiums – every dollar matters. Don’t forget that property taxes often go up. Therefore, the reason for this is to ensure that maintenance is in place to avoid any major repair costs. Rely on your real estate agents and other professionals – they know the inside and outside.
Conclusion: The true cost of homeownership
Buying a house is a big deal. And yes, mortgages are a big part of that. But that is definitely not the only cost you face. There’s a lot of budgets, from upfront costs like down payments and closing fees to ongoing bills like property taxes, insurance, maintenance and utilities.
Good news? If you know what’s coming and are planning on it, you can avoid many headaches that are on the way.
FAQ: The cost of owning a home
1. What are the main advance costs when buying a house?
Advance costs typically include down payments, assessment and inspection costs, and closing costs. These range from thousands to tens of thousands of dollars, depending on the home price and loan type. The rule of thumb is to expect 3-20% of the home price for a down payment and 2-5% of the closure fee.
2. Are there hidden costs to plan?
It is not exactly hidden, but is often overlooked. In addition to prepaid expenses, you will need to budget for ongoing expenses such as property taxes, homeowner insurance, utility and maintenance. Some areas also come with HOA fees. These can sneak up on new homeowners if you don’t plan ahead.
3. What is the budget for home maintenance?
The general rule is to ensure 1-4% of your home’s value each year for maintenance and repairs. So for a $300,000 home, it’s around $3,000 to $12,000 a year. It may not take years to go, but I’m glad you plan ahead when your roof or HVAC system needs to be replaced.
