Estimate your homeowners insurance and property taxes
In addition to your house payment, you will need to make sure that you can also afford homeowners insurance, as well as property taxes. Failing to pay your local real estate taxes means that you can end up with a tax lien on your home. Homeowners insurance will typically run between $1,000 to $2,000, depending on a number of factors like your home’s value and what it would cost to replace it.
Depending on where you live, annual property taxes can average between one percent to two percent of your home’s value. Sometimes real estate taxes and homeowners insurance are included with the mortgage payment.
Estimate the closing costs
Closing costs are another big expense for homebuyers. They typically include things like your mortgage application fee, house inspection, the lender’s appraisal of the house’s value, title search and recording fees, title insurance, loan origination fees, and sometimes attorney fees.
Closing costs can end up being between two percent to five percent of the home’s price. That means if you are buying a house for $200,000, you could end up paying between $2,000 to $10,000 at closing time.
Account for other household expenses
Lastly, you need to budget for things like utilities, as well as household maintenance and repairs. If you are buying a large, older house, it might not be as energy efficient. Therefore, it could cost you more to heat and cool – which is something to keep in mind. You might ask the realtor for a copy of the previous year’s utilities as a point of reference.
Furthermore, you will eventually have to replace appliances and make repairs to the home. Some household repairs – like replacing the roof – can be expensive.
In short, buying more house than you can really afford puts you at greater risk of foreclosure. Therefore, you need to carefully calculate all of the expenses involved when it comes to buying and owning a home to determine whether you can actually afford it. For instance, you need to consider your current expenses, in addition to your monthly mortgage payment. Furthermore, you need to calculate things like homeowners insurance, property taxes, and other common household expenses. Also, don’t forget about closing costs – which can add thousands to the home’s final price.