When consumers carefully consider buying a home, most of their attention is directed at how much money is needed for a down payment, how much are my closing costs and how much money do I need overall to close the transaction. Those are important considerations and your loan officer can provide you with a pretty good idea about the amount you’ll need at the closing table. In addition, you’ll get information about how much you can qualify for and what your monthly payments will be. If you’re renting now, it’s very likely that your rent payments each month are at or below what you could buy and finance a house for. If your rent is $2,000 per month and your principal and interest payment is $1,700, it’s a pretty easy decision, isn’t it? But there are other financial considerations you need to be fully aware of. Here are some things that can cost you that you might not have thought about.
Emotions- Most people don’t buy the first home they see. They look at several homes during the course of home buying. They might certainly decide on the first home later on, but they know they have more they need to see. But one day, after several weeks of looking for a home, the “dream home” appears on the market. It has everything they wanted in a home. It’s a competitive market and they know the home won’t last very long. Their real estate agent suggested $200,000 as their offer but instead decided to up the ante right off the bat and offered $220,000 to make sure their offer was accepted.
It was an emotional decision, not a financial one. Paying more than needed or otherwise letting emotions be their guide, it cost them $20,000 or even more. It was an unneeded, expensive cost.
Taxes- An estimate of property taxes can be provided by the loan officer but for those who are only looking at the $1,700 per month mortgage payment, when they get their property tax bill, they might be surprised to discover the property taxes made the home even more expensive than they thought.
When homes are listed, there is typically a number that details the estimated property taxes for the coming year. Property taxes are factored based upon the value of your home compared to the value of other homes in the area. If property values increase year-over-year so too will property taxes increase. Increases in homeowner equity is always a good thing but property appreciation also means taxes are up.
HVAC- Heating, ventilation and air conditioning can cost in two ways. Each month when the utility bills come in or worse when they fail. If the AC units are older, they will soon fail. It’s mechanical and mechanical things eventually wear out. When the motor burns out on an outside AC unit, that means the entire unit needs to be replaced. And when AC units need replacing, it might also mean replacing interior heating units as well. This can be expensive and spending $5,000 or more on a new AC unit is at least what a homeowner will pay.
Further, older units are much less efficient than newer models. Newer HVAC systems will cost more but over the long run will ultimately recover the initial cost with the monthly savings on utility bills. If you’re thinking of buying a home, make sure you get the HVAC systems checked thoroughly. If you’re considering several properties, it just might be a deal breaker.
Easements- An easement is the right of a third party to access your property with or without your permission. That sounds a bit strange at first but if the electricity goes out in the neighborhood and the transformer is located on a utility pole that rests in your backyard, the electric company needs to go fix it. Or, there is a utility line that runs right below that nice new storage shed you had built last year. If the utility company needs to get at that line for repair or replacement and your shed needs moving, they’ll move it or otherwise damage the shed while accessing the line. They have a right to and there’s nothing you can do about it. Easements are listed in the title report of your home or in some areas on a survey of the property. If your shed or your property is damaged, they’re not obligated to reimburse you. It was you who put the shed on top of their line, not them.
Emergencies- When you rented and the hot water heater or refrigerator went out, all you had to do was call the owner or property manager and it was fixed at no charge to you. But when you own your home, these emergency costs are borne by you. You’re the property manager. Depending upon the age of the home you might be paying for repair costs sooner rather than later. You should set back a little each month in an emergency account to help offset sudden repairs as they arise.
Coast 2 Coast Lending offers low down payment Government and Conventional home loans to suit many first time home buyers. Call us at the number above or submit the Quick Request Form to learn more.