Owning a home can be one of the most rewarding experiences in your life. Something to call your own that (hopefully) appreciates over time in which to raise your family.
For all the positives that come with owning a home, if you have never owned a home before, some costs might pop up on you that you weren’t expecting or even knew existed. Luckily, there are a few things you can do to offset these costs and be prepared, so they don’t surprise you!
Below are three fees that first time homeowners miss when looking to buy their first home:
Repair Fees
When you are renting, your landlord or the apartment community would fix anything that broke. Granted, it was on their own time, so you might’ve just fixed it yourself if they took too long, but now you don’t have a choice!
Either you will be fixing things that break, doing your routine maintenance like mowing the yard, or hiring someone else to do it for you.
Most new homeowners can handle the minor fixes that pop up. It’s the major things that can break a budget, such as the A/C going out or a pipe bursting.
Insurance will be required to purchase the home to cover many surprises, but you should consider getting a home warranty for everything else to cover appliances and other unexpected repairs.
PMI
PMI means private mortgage insurance. At a high-level view, it is typically required when a homeowner cannot or chooses not to put 20% of the home value as a down payment. Lenders will view this as a riskier loan and will require the buyer to take out PMI to help offset that risk.
The monthly cost of PMI depends on a number of factors, including the purchase price of the home. Usually, the cost will fall between .5% and 1% of the annual mortgage amount.
This monthly payment does not last forever! It can be removed once enough of the principal amount has been paid off.
Sometimes there is not a way to avoid PMI. Other times lenders might have some options for you, so make sure to ask your lender if there are ways to avoid paying PMI.
Property Taxes
Now that you own an asset and investment, you will be required to pay property taxes.
Even though that might be extra money out of your pocket, property taxes are a valuable revenue source for local governments that help fund schools, parks, libraries, and other public programs.
Normally an escrow account will be set up at closing to help cover the property taxes. Budgeting is important to make sure you can afford the home you want plus cover all the costs and fees that come with it. A little bit of planning can help your stress level in the future and help you enjoy the joys of homeownership that much more!