Posted on: 14 December 2016
When you rent an apartment or other property, making the transition to homeownership can be exciting, but can come with overlooked expenses. Before you purchase a home, make sure you are financially prepared for added responsibilities.
Understand The Costs
Many new homeowners are focused on finding a home within their budget, the down payment, and mortgage. Unfortunately, the basic expenses associated with owning a home can rise dramatically and may surpass your budget. Before you go through the process of buying a home, make sure you understand all the costs associated with its upkeep. One example is insurance. Homeowners insurance is essential, but without knowing about the area, you may find your insurance is unaffordable. Living in a flood prone area or a street with poor drainage could affect your monthly insurance rates. Another important expense is property taxes. Property taxes are usually based on the assessed value of your home, which can fluctuate each year.
Have A Cushion
You should not drain your bank account on the down payment, because you still need a financial cushion for unexpected repairs. Unlike many rental properties, there is no landlord or property manager available who might handle repairs as part of your leasing agreement. Some common, major repair expenses are repair or replacement of the HVAC system, plumbing issues, or electrical problems. Although most, if any, problems will be caught by the inspector before you agree to purchase the home, it may be in your best interest to have additional inspections done by specific contractors. Additionally, going from renting a residence to owning a home requires maintenance and it is now your responsibility. For example, mowing the lawn and shoveling snow off the walkway requires supplies you may need to purchase immediately.
Know How Much Freedom You Have
One of the lures of owning your own home versus renting is having more freedom to decorate or remodel as you see fit. This is not always true. Before you choose a home, make sure you understand any restrictions by jurisdiction or ones implemented by a homeowner's association. Both can place limitations on exterior renovations or even the decorations you choose outside your home. Breaking the rules, even unknowingly, can result in fines or legal ramifications. Furthermore, if any renovations are already in progress, you will have lost your investment and will need to spend additional money to reverse any changes.
Being a first-time homeowner can be a complicated process. To make sure you can reasonably afford your first home, understand all costs and limitations associated with homeownership.Share