Buying a home is the American dream. Sadly, many people learn too late that they simply weren’t ready for this venture in life. Buying a home creates many expenses that far too many people do not consider before they take the plunge to by a home. Rather than endure the hardships of a foreclosure or other problems as a homeowner, ensure that you consider all of the fees you’ll pay to live the dream. Hundreds of thousands of homeowners do not take this simple step ahead of purchase focused solely on mortgage costs alone. Consider the five fees on the list below before jumping the bandwagon to become a homeowner.
1- Property Taxes
Property tax rates, or real estate tax rates, shock many new homeowners. Sure, the cost of a mortgage is traditionally lower than rental rates, but tally in additional costs, such as the annual property tax, and the savings may not be so significant. Use a property tax estimating tool before purchasing a home rather than buying the house with hopes you can afford the property tax. This expense is one of the biggest financial burdens for many new homeowners. Do not get in over your head when buying a home due to excess property tax rates.
2- HOA Fees
HOAs, or homeowners associations, provide homeowners within a selected community with a variety of services in exchange for a monthly fee. This includes programs that improve the curb appeal of homes in the area, events for homeowners, and strict requirements. Membership in an HOA is not optional. While HOA fees vary from one organization to the next, it is essential that you are prepared to pay the costs. They can average $331 in smaller areas to $591 per month in cities like New York City. Budget for HOA fees before buying a home.
3- Home Maintenance and Repairs
As a homeowner, any repairs or maintenance the home requires is your responsibility, both to arrange and pay the costs for professional service. You’ll need a variety of regular services as a homeowner, including pest control, trash pickup, and lawn care, as well as those unexpected major repairs such as clogged pipes, septic tank issues, or problems with the roof. Home Advisor reports the average homeowner spends $168 per month in maintenance and repair fees. Before you buy a home, be sure that your budget allows for these expenses.
4- Home Insurance
Home insurance provides homeowners with financial protection in the event of weather damage, burglary, or home invasion. The insurance covers the home as well as structures of the home such as sheds and garages. Without this protection, financial devastation could occur if you’re the unfortunate victim of such a situation. Compare home insurance costs and add a policy as soon as possible after buying the home. Even when home insurance isn’t required, protecting your home with the coverage offers peace of mind that you’ll appreciate. Compare costs with a few companies, evaluating the policy and its coverage/exclusions, to find the best insurance to protect your home and family.
5- Closing Costs
This homeownership fee is incurred before you actually receive the keys to the home. Closing costs average 2% to 5% of the total home cost. This fee is due and payable at the time of purchase. Some sellers do offer closing cost assistance; however, do not automatically expect this benefit. Closing costs include lender fees, title insurance, attorney fees, and a variety of additional fees.
Are You Ready to Buy a Home?
There is a lot more to homeownership than many people realize from the outside looking in, especially where costs are concerned. While homeownership is the American dream, it is essential that you recognize the costs and ensure that it is a venture within your budget and means. Getting in over your head is the last experience you want to ensure. The five expenses above are among the most common costs homeowners endure. Prepare yourself for these fees and others when you become a homeowner.