Buying a home is about much more than the listing price. From taxes to insurance, there are several things you’ll be expected to pay that you might not realize. Planning for them now will help you avoid adding more stress to the process or encountering a surprise once you sign on the dotted line.
Property taxes are a necessary evil for all homeowners. They are used to fund local schools and a variety of other government programs and services in the city or town where your home is located.
The tax rate is set by your state and is calculated annually based on your home’s assessed value. Funds are typically taken out of an escrow account that you establish when you buy a home, so you might not even know that they are happening.
Much like car insurance protects your vehicle in the case of an accident, homeowners insurance does the same thing for your house in the event of a natural disaster, fire, or other event that damages your property.
Like property taxes, the cost varies based on where you live and how disaster-prone the area is. You might be able to save a little money by bundling your homeowners insurance with your car insurance or life insurance through the same company.
Private Mortgage Interest (PMI)
PMI is required for anyone who buys a home with a down payment less than 20 percent — which, let’s face it, is most homebuyers these days. It protects the bank or mortgage lender in the event that you default on the loan.
Paying a few hundred extra dollars per month might seem like a nuisance, but it can pay off in the long run if you make a worthwhile investment on your home.
This one seems simple but is worth mentioning as a reminder. As a homeowner, you will be responsible for all of your utilities (water, electricity, heating, etc.) and associated bills like Internet and cable.
Chances are, your new home is larger than where you lived previously, so plan to have some wiggle room in your budget until you see how things play out in your new space.
Homeowners Association (HOA) Fees
Finally, if your new home is part of a community with a homeowners association, you’ll need to pay the associated HOA fees. These fees range from a few hundred to a few thousand dollars per month and most commonly cover maintenance of the community’s common areas — lawn care, snow removal, etc.
In some higher-priced communities, HOA fees may also cover community event spaces or even things like on-site fitness facilities. Again, it’s important to know what these fees are upfront so you can work them into your budget and leave some wiggle room to enjoy your new home!