Buying your first home is a once-in-a-lifetime achievement and one of which you can take great pride in. As you get ready to take this important step, you’ll want a budget that considers all aspects of homeownership. Luckily, with today’s low interest rates, you should have plenty of room in the budget to have the home of your dreams and all that comes with it.
Private Mortgage Insurance
If you pay less than a 20 percent down payment, your lender might require you to have private mortgage insurance — also known as PMI. This protects the lender in case you default. Premiums vary between about 0.25 percent and 1.5 percent of the loan amount per year and are usually included with your monthly mortgage payment. This cost typically goes away once you have 20 percent equity in your home — and with today’s housing market, this can happen sooner than you might think. Make sure to stay on top of your home’s market value and talk to your lender about when you can drop this insurance.
Even if you don’t need PMI, a lender will likely require you to have homeowners insurance as a condition of your loan. Even if it isn’t required, it’s still a good thing to have. Sometimes the insurance can be rolled into your mortgage payment but usually, you will select your own insurer. Rates and coverage vary. Premiums may be higher in certain areas.
The average effective property tax rate is 1.69 percent and are based on the value of your home, the land your home is on and improvements such as a pool. The higher the value, the higher your taxes are. This is typically paid as part of your overall mortgage payment each month.
Purchasing a home in a master-planned community gives you access to some great amenities like pools and clubhouses, but there is an associated cost. In Vanbrooke, residents pay an annual fee to the community’s homeowners association. The fee generally covers the cost of maintaining the amenities as well as upkeep of the community and other services that benefit the neighborhood and preserve your home value.
Homes come with lawns and those need to be mowed. Your property might also have trees to prune and landscaping to maintain. Factor the cost of purchasing lawn equipment into your home’s purchase price if you don’t have it already. Luckily, there are plenty of affordable options. If you plan to have a professional take care of lawn maintenance, add the cost to your monthly home expenses budget.
You’ll also want to think about once-a-year maintenance of your HVAC system — just like when it comes to your own health, giving your air and heating system a regular check-up will likely negate future problems. Pest control is also a good investment — treating termites early is much less expensive than letting them go unchecked. Pest control is something your landlord or apartment complex likely handled without you even realizing to keep the spiders and bugs at bay — it’s now your responsibility. And while you’re being smart about home maintenance, you probably don’t have too much to worry about when purchasing a new home because everything is new and warranties are still in effect.
Rainy Day Fund
There are always unexpected expenses when it comes to your new home. To ensure that you aren’t caught completely off guard, maintain a rainy day fund. How much you save depends on the age and condition of your home. An older home will require you to save more while a brand new home likely requires you to save less. Most financial experts recommend that you budget between 1 and 2 percent of your mortgage balance. If that rainy day never comes, you have a nice start on saving for more of life’s milestones, such as children and retirement.