The Hidden and not-so-hidden costs of owning a home.
THE DOWN PAYMENT: First and foremost is the down payment. This payment can range from 5% of the cost of the home to 20-25%. It is possible to get your payment down closer to the 5% range and this is usually done by mortgage insurance payable by the buyer. This nifty trick is usually only done on resale homes. A new home purchase almost always requires 20% or more.
THE MORTGAGE: A loan taken against the home provided by a lender, this is the largest cost of the home and there are a few things to consider along with it:
1) Mortgage Amortization Period: How long do you want to be paying for your home? Do you want a 15 year mortgage? A 30 Year mortgage? This decision dictates how much principle you will pay along with your interest payments.
2) Open or Closed Mortgage: an open mortgage enables you to pay how much principle you want whenever you want even up to paying your mortgage off before the term and without penalties. A closed mortgage places penalties for any changes made during the term.
3)Fixed or Variable: A fixed interest rate gives you the stability and predictability of one rate, whereas a variable rate fluctuates with the market.
4) Mortgage Insurance: Again, very important to first time home buyers, it is a very nice tool for bringing down the amount needed for a down payment with a cost spread over the mortgage’s amortization.
For a first time home owner, there are a few things to do before getting to the step of obtaining a mortgage:
CREDIT CHECK: getting a credit check is essential to discovering whether or not buying and owning a home is even possible. It is the very first thing that needs to be done in the quest for home ownership.
PRE-APPROVAL: a pre-approval gives the home buyer the okay to go ahead and start shopping. Your pre-approval says how much your mortgage can be and the amount of the interest rate.
FINANCIAL SITUATION: What is your financial situation like? It is important to sit down and seriously consider it. Is your budget already tight? Would owning a home become a financial hardship?
Once you purchase a home, there are still some post -purchasing costs to take into account before you enter into the bliss that is home sweet home.
CLOSING COSTS: Closing costs are upfront costs that you pay usually before you move in. They may include appraisal fees, legal fees, title insurance, water tests, septic tank tests, etc. The buyer is typically responsible for these, but occasionally the seller will include them in the purchase of the home.
MOVING, STORAGE AND OTHER COSTS: Do you need a moving truck? Do you need to hire a company to pack and move for you? Do you need a place to store furniture that won’t fit in your new place? Other things to take into account are utility hook up, cleaning, painting, immediate renovations as well as basic furniture and appliances.
Once, you get the keys and are ready to call your new place home, there are still some ongoing costs you must not forget as you, the homeowner, are responsible for them and keeping your new budget and homeowner responsibilities in check. These may include but are not limited to:
- mortgage payments
- property taxes and insurance
- renovation costs
- maintenance or property/repairs
- and landscaping
So, much goes into the dream home ownership and at Denlin Properties, we can help you on your way to realizing that dream.