Costs of Owning A Home

Many homebuyers underestimate the costs of owning a home and I have written about this in the past but it is so important to understand and continually be reminded of.  Here is an interesting statistic:

The National Association of Home Builders calculated that the typical buyer of a new home spends about $8,640 within the first 12 months for furnishings, appliances, and home repairs and fix-ups, while the typical buyer of a resale home spends $6,540.

I feel the reason this happens is because buyers are doing their research and preparing in advance.  We as professionals in the real estate field need to make sure we do a better job of this too.  I know on the mortgage end the buyer needs to be informed about how taxes and insurance can go up especially here in South Florida where we are already seeing homeowner’s insurance premiums increasing. 

Another article from The Wall Street Journal not to long ago talked about how Homeowners should have 1% of the purchase price of their home in savings for improvements and surprise expenses, he says, “That is the absolute minimum. It’s better to have 2% to 3% socked away somewhere.”

If you are buying a home you also need to keep in mind that just because you are pre-qualified for a certain amount doesn’t necessarily mean you can afford it or you are comfortable with your payment.  You should keep your total debt to income ratio at 41% or below preferably 36%. 

You should also consider how much money to put down.  Just because you have 20% doesn’t mean that is your best option.  You want to make sure to have at least 12 months of mortgage payments or more in reserves.  You don’t want to be house rich or cash poor. 

I have a lot of people ask me about bi-weekly payments which results in 13 mortgage payments per year instead of 12 and dramatically reducing the time it take to pay off your mortgage.  My advice on this is to not have it set up with your lender so that you aren’t locked into having to make 13 payments in case an unexpected expense comes up.  I do understand some do not have the discipline to do this so I guess you could just set up making an extra principle payment as an automatic debit. 

These are just some of the items to consider and there are certainly much, much more.