Many new potential homeowners look at their monthly payment and think ‘Hey! That’s less than I’m paying for my apartment.’ What they don’t always consider is the added cost of having your own place. So what should you consider when you are making out your newly-house-proud budget? What are the other costs of homeownership?
The obvious: Principle and Interest
You can figure this out by checking out my handy dandy loan calculator which should be right over there —->.
Your interest rate is going to be a huge factor here. That’s why now is a Fab. U. Lous. time to buy even if you think prices are going to decline slightly in the future. There’s nowhere to go but up with interest rates.
The less obvious, but still included in your basic monthly payment: Taxes and Insurance
You’re going to have to pay property taxes & ‘hazard’ or ‘homeowner’s’ insurance.. Maybe even flood insurance. These items will be paid out of your escrow account and added into your monthly payment. They will be considered by your lender in deciding how much you can afford.
Still less obvious: Utilities
Sure, maybe you pay your own electric or gas bills at your apartment but how much do you think the size of that new McMansion matters? Not to mention that in your apartment you may be ‘insulated’ by the other units around you. A 1500 sq ft single family home is going to be a lot more expensive to heat and cool than your 800 sq ft apartment. And the gas bill for that gorgeous 1915 Craftsman with the original single-paned windows…well, you probably don’t even want to know. And then there’s the other stuff you may not think about that are sometimes included in your monthly rent: water, sewer, cable, phone, gutter cleaning, lawn mowing, garbage pick up… you get the idea. Now, in most areas of Chattanooga you won’t be paying for garbage pick up but if you opt to move out to the sticks of Signal Mountain or Sale Creek, you might find yourself either paying for it or with a back seat full of junk every week.
The thing no one wants to talk about: Repairs
Yep, that beautiful little brand new construction home o’ yours is going to need repairs. Sooner or later. Whether it’s a toilet handle that needs jiggling or a new roof, you’re going to have to fix something, sometime. And don’t even think about just letting it go. That only makes it worse and costs more in the long run.
The fun stuff: Improvements and decor
Maybe you’ve never lived anywhere that you were allowed to paint, put up curtains, change out the tile, add on a new bathroom…you see where I’m going with this. Now that you have that spiffy new place, you’re going to want to invite friends and family over for Thanksgiving. And that means you need a shiny new dining room table twice as big as any you’ve ever had. You don’t want to get to the end of the month and not have anything left over for that gallon of flat enamel that will make your den Absolutely. Perfect.
The moral of the story:
When you are working out the budget for your new house, make sure you consider ALL of the costs of homeownership. Don’t just take the word of your lender who says you can afford a $1,500 mortgage payment. Think it through and consider stepping back just a little so you can not only make your payment, but also buy the groceries to go in that lovely new stainless steel side by side.