While particulars such as a monthly mortgage payment and insurance are somewhat predictable, fees such as property taxes, utilities and surprise repairs often leave newby homeowners stunned at unanticipated additional costs in excess of $9K annually. "House poor" is no longer a foreign concept and the excitement of owning a dream home has been tarnished by the expense of living there. In truth, there are five common expenses that are generally overlooked by most first-time buyers:
1. Closing FeesThe closing table can be a reality check for unprepared buyers and is one of the most important reasons to work in tandem with an experienced lender and strong real estate agent. Most closings include additional fees pertaining to mortgage taxes, lender fees, lawyer fees, title work and insurance, county clerk recording fees, potential tax reimbursement to the seller and so on and so forth. In fact, buyers should anticipate additional expenditures of two to five percent of the home sales price out of pocket at the closing table. While some fees vary from state to state, it is imperative to consult a lender and realtor in order to be amply prepared for closing.
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2. General Maintenance & RepairsOne to two percent of a home's value should be budgeted annually for miscellaneous maintenance and surprise repairs as well as general upkeep. Of course the number varies depending on the state of residence. For example, some states are susceptible to extreme winds which can affect roof conditions. Other states might experience large volumes of rain and flooding which could adversely affect the foundation of a home over time. In addition, condos may not require as much out of pocket for general repairs as would a home depending on the condo association's bi-laws. Non-DIYers should budget additional funds in order to pay professionals to perform necessary maintenance and upkeep.
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3. TaxesProperty taxes are always changing; decreasing or increasing based on zip codes and other variables. When planning for future expense, talk with your realtor regarding property taxes and consult a good attorney if you feel your home's assessment is too high.
4. UtilitiesUtilities alone can force a proud new homeowner into bankruptcy. While vaulted ceilings are a common "must have", it costs money to heat and cool the extra space. Ask the seller if he or she is willing to share copies of monthly utilities in order to calculate the cost of running the home before you sign a purchase agreement. In addition, inquire about fees pertaining to law care and pool maintenance if applicable. You might be surprised at what you will be spending to live in your dream home.
5. InsuranceBe sure to shop around for the best homeowners insurance and do your homework! Investigate replacement cost policies versus those which offer depreciated value reimbursement. You want to get the full value of your refrigerator if it breaks down and not just half! Inquire about discounts for which you may qualify as well as working from home and bundled packages including auto insurance. Make sure you fully understand the limitations of your policy and be prepared to make up the difference, especially with flood insurance!
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