Thinking About Buying a House?
We've shared before how we wish we would have waited before buying a house. And in hindsight, 2007 was a seriously terrible time to buy. The real estate bubble was bursting at the seams, and we have watched it pop and splatter remnants all over our financial lives. We stretched ourselves too thin, had too much debt and added insult to injury by taking out a loan for a vehicle. I'm proud of how we've dug our way out of the mess, and the lessons we have learned are priceless. But, what if we had a do-over? What would that look like?
This is where we get to plead with those of you who have yet to take the plunge into home ownership to please weigh the options and proceed with caution. I'm not trying to scare you into not buying a home, I just want you to be prepared for all the expenses that come along with owning a home.
Budgeting for a Home Loan
- Know your budget: You can't know your budget unless you, in fact, have a budget and monitor it on a regular basis.
- Determine what you can afford: Your budget for your home should be less than 25% of your take-home pay.
- Save for a down payment: It would be best to save 20% of your home value for a down payment so you can avoid paying private mortgage insurance (PMI).
- Get some quotes: Shop around a few financial institutions, or find a website that will find the best rates for you. Make sure you stick to your guns about the amount you are putting down and how much you can afford per month. This may have changed in the past few years with the housing crash, but when we were shopping for a home, the real estate agent and mortgage broker practically begged us to buy a more expensive home. So, we did...
Cost of Home Ownership
One of the biggest wake-up moments for us after finalizing our mortgage the first time was all of the other expenses we either hadn't thought about nor budgeted for. Here's a list in no particular order (estimated yearly costs in parentheses for most):
- Lawn care: Water ($100), hoses ($40), sprinklers ($30), fertilizer ($160), lawn mower ($200), gas ($20), trimmer ($40), edger ($30), mulch ($40), aeration ($40).
- Snow removal: shovels ($25), snow blower ($600).
- Energy costs: If you have an older house, money could literally be flying out the window. Plastic for the winter windows, door seals, added insulation.
- Furnace filters: They are supposed to be replaced monthly ($50).
- Repairs: These could range from DIY cheap to tens of thousands of dollars if you need to replace a roof.
- Upgrades:Backsplash, pallet wall, etc.
- Deck maintenance: water seal ($20), stain ($20).
- Taxes: We pay more than $3,600 in taxes a year. That means we have to save $300 a month to keep Uncle Sam happy.
- Window treatments: We bought a new house...it didn't come with window blinds. Hello, $1,000+ unexpected expense.
- Decor: It's your home. You'll want to furnish it to make it your own. That costs a lot of money.
The prices are sparse in the above list. I didn't do a lot of research, those are just rough estimates for a gauge of how much goes into maintaining. But add them up and think about how much they would add to your monthly budget.
What most surprised you after purchasing a home?