Buying your first home can be one of your greatest experiences—as long as you make sound, well-considered choices every step of the way. To do that, you need to know every crucial bit of information there is to know about what it takes to buy a home that pays off in terms of savings, thanks to well-managed expenses.
If you’re looking for your first ever home, be sure to understand and prepare for these 5 expenses:
1. Closing Costs
After your loan has been approved and your home inspection is done, it’s time to close. You will have a closing meeting where you will sign the final paperwork and pay a number of pertinent expenses that include the following:
Taxes and insurance escrow
Lender application fees
Title insurance (the insurance policy for the deed)
Recording fees (paid to the county clerk’s office to record the deed)
Reimbursements for any real estate tax that the seller has paid upfront
Closing costs generally cost you an average of 2 percent to 5 percent of your home’s total cost. Specific costs, however, will depend on which state you’re buying property in.
Your total closing costs won’t be finalized until closing time. Before then, you’ll have only a ballpark figure for your initial loan estimate.
2. Property Taxes
Property taxes vary by state and then city. And your city, its ordinances, even your immediate neighborhood will determine whether your taxes will increase or decrease.
When planning expenses, you can use the Tax Foundation’s property tax data lookup tool by county. If you notice any discrepancy between your taxes and those paid by other homeowners in your area, you can grieve your tax assessment, with the option of hiring a lawyer to help you, for a percentage of the amount you eventually save.
3. Home Maintenance
For annual maintenance costs, expect to pay at least 1 percent of your home’s value. Note that the upkeep of your single-family home on your own land will cost you a bit more than condominiums or attached townhomes, says Zillow president Jeremy Wacksman.
Most likely, your most common maintenance needs will include house cleaning, yard care, gutter cleaning, and pressure washing. As far as specific prices go, your location will be huge factor in determining the figures. Enlist the help of your agent and home inspector with estimates of the cost of routine jobs in your area/neighborhood. This will be especially helpful when it comes to first-year costs.
Utility costs can set you back as much as $200 per month. Your total annual utility costs will be influenced by such factors as climate/seasons, local costs, and specific appliances. The national average utility cost is almost $5,000.
5. Homeowners Insurance
This is a requirement if you’re going the mortgage route, and a good idea in any case if you’re paying cash.
A few tips:
Opt for a replacement cost policy instead of one that yields the depreciated value of the items lost. The former will cover the cost of replacing items that get stolen or damaged in a fire.
To maximize your savings, shop around both online and offline, making sure to get crucial information such as the following:
Applicable discounts, including premium reductions for security systems
Bundled coverage for your home and your auto insurance policy
Know the limitations of homeowners insurance. Policies generally protect only your home and items possessions within it. Get additional protection if you’re in a flood zone or an earthquake-prone area.
Get ready to savor one of the most rewarding investments you will ever make in your life—emphasis on get ready. After all, buying a home is also one of the most significant financial investments most people will ever make. So do your homework and come to the closing meeting fully aware of what you’ll be paying and knowing you have your strategy down pat.
Contact Team Clancy today to make sure you have a team who will back you up and make sure you make the smartest choices.