No questions asked, buying your first ever house can fill you up with happiness and fulfillment. You get to have your own living space and modify it in any way you desire. Plus, you can turn it into a profitable rental property, which is a long-term investment that you’d definitely want to consider.
But before you fall in love with the idea of buying your first home or property investment, it’s essential that you know the costs the comes with it. The last thing you want to happen is to acquire a property that you can barely afford. We’ve listed here the top expenses that first-time buyers like you should take into account.
1. Maintenance and repairs
While it’s true that most home buyers already know about these expenses, only a few actually plan for the upkeep or repair costs of their properties. Ideally, you should have savings of at least %1 of the value of your home. The costs tend to be higher if you’ll be purchasing a single-family house than attached townhomes or condominium units.
To get a better idea of the rates of maintenance services in your area, consult your local providers or agent. Upkeep services may include gutter cleaning, lawn care, and house cleaning. In case you’re planning to get a unit that’s part of a residential tower, it’s best to directly talk to the real estate company or developer you’ve chosen regarding the upkeep and repairs. Doing so allows you to know if there are services that they can directly provide or contractors they can recommend.
2. Property taxes
Next thing you should take note of is the property taxes. These are paid to your local government and generally calculated based on a home’s certain percentage value. To put it simply, you’ll likely pay more if you’re living in a location with high local tax rates or in an expensive property. In most cases, property taxes are added to a homeowner’s monthly mortgage payment together with the homeowner’s insurance then transfer these to an escrow account. In this way, you’ll be able to pay for your property tax in small increments instead of one big payment. Don’t forget to ask your lender if the tax will be included in the monthly payments or you’ll need to settle them by yourself.
3. Closing costs
The closing costs come once your loan has been approved and you’ve completed the purchase of the property. After getting your house keys, you’ll need to attend a closing meeting wherein you will sign a list of costs such as the legal fees, lender application fees, mortgage interest, title insurance, taxes or real estate tax reimbursements, and recording fees for the deed. According to real estate experts, the closing costs can amount to 2% up to 5% of the property’s total cost. Though this might still vary from state to state.
Another obvious yet often neglected costs of buying a home are the utilities. In most cases, you will be responsible for 100% of the costs of lighting, cooling, and heating of the house. And they can quickly add up over time without you noticing. In fact, surveys found that an average homeowner can spend around %250 for utilities each month.
So, before moving into your new home, be sure to transfer your local utilities and find out about the other extra costs you might need to pay. One smart move is to ask your neighbors where they get their utilities from. This enables you to compare rates and choose one the suits your budget. Home utilities will include sewage, gas, water, electricity, trash, Internet, and recycling.
5. Inspections and appraisals
Inspection isn’t a requirement but it’s always a worthy service to pay for. Homeowners should consider having two inspections: the standard home inspection and termite inspection. The first one is about assessing the overall condition of the house, from cooling, heating, wiring, up to the roof. The second one is for preventing damage to the structure or foundation of the property due to termites.
As for appraisal, you’ll basically pay for a professional to look at your property and determine how much does it cost. Depending on the complexity and size of the house, appraisal fees can range from $300 to $700.
Purchasing and maintaining a house is not that easy on the pocket as many buyers expect. It’s critical that you are on the track with the expenses that come with such investment, or you might end up losing more than getting the returns you expect. Don’t forget to take note of these expenses and prepare for them before buying your first property investment.