Whether you’re renting a home somewhere or living rent-free, you might be anticipating buying a home in the future. Many of us look forward to having a place we can truly make our own. You can make permanent changes to interiors and exteriors without having to undo them at the end of a lease. Best of all, you can build equity in a property, instead of forking all your money to a landlord. While homeownership is a worthy goal for anyone, it’s important to consider the costs to buy.
Securing a Mortgage
Buying a house is not like buying most other items. Most people will have to finance a new house purchase with a mortgage. A bank, credit union, or lending company will offer you a loan that must be repaid over a certain time period according to the terms of the mortgage. Lenders expect borrowers to put some skin in the game with a down payment that in most cases is up to 20% of the property value. That’s $40,000 for a $200,000 home! That’s a tall order for many people, even if you’ve been saving for a while. There are other loan options with a much lower down payment as well as homebuying programs that offer grants if you meet certain criteria.
Exploring Your True Monthly Payment
Some online mortgage calculators provide a monthly payment estimate based on the total property cost, a down payment, interest rate, and the loan repayment period. For most people, the monthly payment also includes property taxes and insurance. These other costs are usually put into an escrow account that the mortgage company uses to pay your taxes and premium for home insurance Newark DE. Lenders usually require borrowers to carry insurance to protect their investment from certain perils, such as fire, theft, and other natural disasters.
Including Other Expenses
As a homeowner, you’re obligated to pay for any utilities needed for your house, including energy, water, and cable among others. The utility bills for an entire house may be significantly higher than that of an apartment or rental home. Your future residence may also be in a neighborhood that has a homeowner’s association. You’ll be required to pay an annual fee that covers community expenses associated with amenities such as a clubhouse or pool, and neighborhood maintenance.
Home is where the heart is, and owning a residence of your own is a goal worthy of your time, money, and consideration. Think carefully about the true cost of ownership, which is more than just repayment of a mortgage loan. When creating a budget, factor in property taxes, insurance, utilities, and HOA fees as you plan.