What Can I Afford?
When you begin your home–buying process, you probably have a firm idea of what you can afford. Be sure your estimates account for the big picture. Consider these expenses when figuring your homeownership bottom line.
1. Mortgage Costs
Most buyers require a mortgage. Work with your lender to pinpoint your monthly house payment, and the costs of your mortgage. While the former will be generally consistent based market rates and loan types, your mortgage costs can vary significantly. Be sure to compare mortgage offers.
2. Homeowner’s insurance
You also need to insure the value of the home against fire, theft, and perhaps flood damage. This insurance is purchased separately. Shop around for the best price and remember that this cost can go up each year, especially if you file a claim.
Property taxes can add hundreds of dollars to your monthly mortgage payment. They also can increase depending on your community’s school and town budgets. Typically, a home is taxed on its assessed value, which is an amount equal to a fraction of its appraised value.
4. Private Mortgage Insurance (PMI)
If you put down less than 20% on a mortgage, you’ll need to pay PMI, which protects your lender against a potential default on the loan. PMI generally runs up to .75% of the loan amount, depending on your loan to value and credit score.
Utility expenses are a given … water, gas, electricity, and oil bills. Have your Prudential Real Estate Agent ask the home seller for their average monthly cost over the last year. Then you can estimate how much to put aside monthly.
6. Yard Upkeep
You may purchase a home with a large yard and beautiful landscaping. Unless you have a green thumb and the desire and time for maintenance, you must hire a gardener to mow, weed, and care for those beautiful flowers and shrubs. Ask your Prudential Real Estate agent for referrals and compare costs.
7. Home Upgrades
You’ll probably want to upgrade your home once you’re in. Make a list of all the projects you are considering — such as adding new flooring, drapes, or appliances — and leave room in your budget for some of these costs each month.
Once you tally these costs, you may need to adjust your price range. This will make for a smooth and financially comfortable transition.
Your Prudential Real Estate Agent can help you each step of the way.