The home buying process can cloud your judgment about how much you can actually afford to spend. You might focus solely on the listing price of a home instead of focusing on the overall costs of homeownership. If you look beyond the down payment and mortgage payment, you’ll quickly realize that there are hidden costs of homeownership that add up quickly.
Home Inspection Fees
Each state has their own rules around the kinds of inspections a buyer needs. The exact cost for a home inspection will vary, but you can assume it will cost several hundred dollars, at a minimum.
Homeownership typically means more space, and more space means more furniture. One of the biggest costs of buying a home is the cost to furnish your home: TVs, entertainment centers, beds, couches, and whatever else your heart desires.
Repairs, Repairs, Repairs
This is probably one of the most frustrating aspects of being a homeowner. Taking care of your home plays a crucial role in determining your home’s value. The last thing you want are home repairs right before you sell your home, so it’s important to make sure you’re on top of required maintenance.
Repairs can be as small as changing light bulbs, a faucet, or changing some hinges on a closet door. However, big ticket items can be incredibly costly, like replacing HVAC, installing new windows, or replacing your roof, which often costs upwards of $15,000.
Increase in Property Taxes
If you’re taking out a mortgage for your home, your lender will typically require you to maintain an escrow account for your property taxes and homeowner’s insurance policy. In some states, you may have to pay 6-8 months of taxes in advance as part of the closing costs. So if your annual property tax is $2,400/year, the lender will require $1,200-$1,600 to be held in an escrow account so the lender can pay the property taxes when it’s due.
Another thing to keep in mind is the possibility of increasing property taxes. If you buy a home in a booming town, get ready for those taxes to keep going up, year after year.
Most homeowners will end up doing some type of remodeling on their home. It can be as complex as adding bedrooms or finishing a basement, or as simple as painting the walls. Different types of remodeling can add value to your home, such as updating your kitchen, adding new bedrooms/bathrooms, or installing new windows.
Buying a home can be a great long-term investment, but make sure you’re aware of the many costs that come with homeownership.