Buying a home is one of the most important decisions you’ll ever make. It’s also an expensive decision and one that can have a significant impact on your daily life for years to come. That’s why it’s not something you should take lightly. There are some things you can do to make the process easier and less stressful. This article will explore 2 major things every first-time homeowner should know before buying their first house, location, and costs.
The location of your new house will have an impact on your daily life for years to come. Where you live will also affect your quality of life, and not only in a financial sense. Do you prefer a sprawling suburban area with lots of houses? A bustling city full of places to go? A rural area where there is nothing but acres of farmland?
It’s important to know what you want out of your neighborhood when choosing a home, and perhaps just as important to understand that no neighborhood will be 100% perfect.
Even the friendliest neighborhoods have their drawbacks. For example, a busy street might simply be noisy, or a desirable neighborhood school may be overcrowded. Choosing a home to fit your needs is important, but don’t let it blind you to potential problems.
It might seem like common sense, but you’d be surprised at how many people have unrealistic expectations about where they’ll live.
Whatever type of neighborhood you’re looking for, many factors will come into play during the home buying process – so you’ll want to do your research beforehand.
There are many costs associated with purchasing a new place beyond your monthly mortgage payment. Many first-time homeowners overlook this fact and are often surprised when they can’t afford as much as they expected.
If you want to know more about the cost of homeownership before you sign on the dotted line, here’s a breakdown of typical expenses that first-time homeowners should know about:
Upfront costs: The price of your down payment will depend on various factors, including what type of mortgage loan you choose and the seller’s assessment that your home is worth. Expect to save anywhere from 3% up to 20% depending on these factors, though it can be higher in some cases. You’ll also need money for closing costs, including a title search (the legal process that transfers ownership), an attorney (to help with the paperwork), and any fees associated with the home loan. This can vary widely, but you should plan on spending about $2000-$4000 for a mortgage loan, though more may be required if you want to obtain home insurance or your down payment will be under 20%. Closing costs typically run between 2 – 5% of your total home cost for a typical house purchase.
Mortgage payments are similar to rent in terms of their affordability, except they’re locked in for 30 years or more and include taxes, homeowners insurance, and monthly servicing fees. That’s why it’s crucial to take into account all of these factors when deciding whether buying is more affordable than renting long-term. You’ll also need money set aside to pay for renovations/maintenance and property taxes – which are usually due twice a year.
Property Taxes: Unless you live in a state with low property taxes, taxes will be one of your highest ongoing costs as a homeowner. Property taxes will vary depending on where you live, but the average is around $4000 annually. In some states, however, the cost can be astronomical such as California’s high taxes. If you’re not prepared for this expense and don’t plan to pay it off over time (usually by making extra payments), then it’s probably best to rent instead. This way, you can leave at any time if the tax bills get too high or something else about your home life isn’t working out – without having to sell your house first!
Homeowners Insurance: You’ll also need insurance for both your property and liability in case someone gets injured while they’re visiting or if their pet damages something inside your home. The cost
Property Maintenance – Maintaining the outside of your home is typically required at least once every ten years, but you’ll also have to be prepared to do work inside your home for things like cleaning and repairs. This is especially true if you choose to buy an older home in need of renovations. You’ll also want money set aside for emergencies (like burst pipes or natural disasters) and special purchases that will enhance your quality of life, such as a grill or patio furniture. Some states require homeowners insurance which helps protect you from these unexpected expenses.
Whatever type of house you’re hoping to purchase, it’s important not to get yourself so deep in debt that you can’t afford to live there. The costs of buying a home aren’t always obvious, and many potential first-time homeowners tend not to do their research beforehand. If you want to be prepared for the expenses associated with homeownership, then take some time to familiarize yourself with these costs ahead of your purchase.
Buying a home is a significant investment that will affect your financial life for years to come. It’s crucial you do the research before signing on the dotted line and make sure you can afford it in today’s economy.
Be sure to consult your bank and/or a mortgage broker (someone who works with home loans) before taking out the loan. They can help you weigh other factors in addition to price, including long-term costs versus short-term savings.