Congratulations! You're thisssssss close to buying your new home, and it's time to start getting your budget together. Every move requires adjustments, even more so when purchasing a home. The difference between renting and owning is vast, and goes far beyond the cost of the mortgage. As you get ready to close and call up moving companies, look through some of these tips on preparing for your next step. Here are 6 things that new homeowners can expect, and we hope having this knowledge beforehand will save you a ton of headaches!
Listen ... I cannot think of a topic that has caused more arguments between couples in my office than the amounts spent on furnishing new homes. Sectional sofas, queen beds for the guest room, chaise lounges in the living room ... it adds up. It's hard getting couples to agree on how much to spend, but even single homeowners underestimate the cost of putting pieces in their home. A recent study by the National Association of Home Builders found that new owners spend an average of $3,778 in furnishings in the first year after a home purchase. And it doesn't stop at furniture. An additional $3,094 was spent on appliances! Altogether, that's over $500/month, and I've seen these totals climb much, much higher. Pricing the new furniture and appliances you plan to add should be as important as planning for a down payment and closing costs. Since the price could exceed what you pay in closing costs, why prepare for one beforehand and wait for the price of a chest of drawers to sneak up on you after you've moved in?
2. Home Repairs
You're not in Kansas anymore, and even you are, now you're there with no super or landlord. Home repairs are now your responsibility, and it's good practice to prepare for some type of repairs every year. It's always important to have an emergency fund, which could be used to cover things like an unexpected home expense. Since you don't know what it will be, it's kind of hard to pick a set amount to save each month for repairs. Instead, commit yourself to prioritizing emergency savings in your budget so that you're not caught off guard when a pipe bursts or the washing machine breaks.
A new home means different utility costs. For homeowners who are building their homes, consult with your contractors to see if any techniques can be used to minimize utility costs. Options could range from installing a particular type of insulation, to hot water heater selection, to even solar panels and toilet selections. When purchasing an already established home, ask the seller to give you an idea of the monthly utility costs, including water. For those purchasing condos or townhomes, the association or property manager will likely have this information on hand, or at least be able to provide estimates.
4. Homeowners Insurance and Property Taxes
When shopping for apartments, the rent is likely be the lion's share of your monthly payment. There may be some add-ons like parking fees and trash pickup, but for the most part, the final price is pretty straightforward. Price-shopping mortgages can be a bit more difficult. The actual repayment of the loan with interest is easily defined, however the property taxes and homeowners insurance aren't standard from one house to the next. Homeowners insurance prices can be based on the construction of the home, location, desired amount of protection, and the insurance company providing coverage. Buying an older home or one in an area with a higher concentration of incidents (e.g. homes in a flood plain or areas prone to landslides, wildfires, etc.), could call for a higher premium being tacked on to your mortgage payment. For property taxes, the amount you pay is based on the assessed value of your home and the tax rate in your county and state. Since the county's assessment could differ from your lender's appraisal, ask for the county tax rate and appraised value of your home to get a better estimate of your tax burden for the year.
5. Landscaping and Homeowners Association Fees
If you've rented a home or apartment in the past, you may have paid for shared services such as access to a common area, or a facility's fitness center. Homeowners Association fees and requirements, however, might be a different cross to bear. While homeowners association fees vary from one community to the next, they are definitely a cost that should be included in your monthly budget. And while the association fee itself is likely a fixed amount, the costs associated with staying in good standing with your HOA may not be. One of the more common expectations from homeowners associations is that you keep your lawn in good shape. When coming from an apartment or smaller home, landscaping costs were likely covered by your landlord. For new homeowners who are subject to these requirements, or who simply desire a well-manicured lawn and property, price-shop for any new equipment (or landscaping companies) that might be needed before buying.
6. Cleaning Costs
You're moving on up in the world, and your income is growing with you. In 2017, the number of dual-income households is on the rise, increasing income but decreasing the amount of time at home. Chores that might have been a little easier to get done when one person stayed at home must now be shared at the end of the day, and if you're like me, they may not always get done. Cleaning services and maids could be a possible solution for those short on time, especially if you're moving into a bigger home than you lived in previously. Your parents might think you're lazy, but remember that you're only accountable to the people in your household. If it fits into your budget and it frees up time in your day, either to get more work done or to spend time with family, it's better to know now than later. My wife and I both work into the evenings, and we labored over whether to use a cleaning service for over a year. When we finally decided to take the plunge, it added a tremendous amount of time back into our lives, time which we've been able to use to complete work that more than covers the cost of the service. While it may not be the case for you, in a roundabout way hiring a cleaning service has made us money. Calculate the time that will be spent cleaning your new home, and decide if the cost of occassional help needs to be a part of your budget.