Key takeaways
- When buying a new home, make sure you know about all the potentially unexpected costs associated with it.
- Know the costs up front, so you know what you’re getting into.
- Look at your cash flow and budget to ensure you have the money to make the move.
You may remember Gilda Radner’s character, Roseanne Roseannadanna, on Saturday Night Live. Anytime she came on the scene she started with, “I’m Roseanne Roseannadanna, and it’s always something.” This classic sketch came to mind when I thought about all the unexpected costs associated with buying a home.
5 Unexpected Costs When Buying a Home
It’s true: it’s always something. Take these five costs into consideration when you’re looking at buying a home. You may already be in your first home and learned about these costs the hard way.
1. Closing costs. When you go through the detail of a closing statement, it’s one expense or fee after another, relentlessly. There’s a lot in that statement.
Make sure you know up front, by talking to the real estate agent or mortgage broker, exactly what each of these costs are. This will help ensure you’re prepared and can settle when you’re ready to buy that house.
2. Home inspection. You’ve absolutely got to have a home inspection, so you know exactly what you’re buying. Once you buy it, you own it; and once you own it, it could be a money pit. You want to make sure you know what you’re getting into up front.
3. Maintenance and repair. Generally, you spend roughly 1% to 2% of the value of your home in maintenance and repair each year. For a $200,000 house, you’re looking at $2,000 to $4,000 annually. Things break down, need repainting, need remodeling, etc., so plan for that.
4. Taxes and insurance. When you own a home, you’re under a taxing authority. The taxing authority collects real estate taxes for schools, roads, and numerous other projects. It is usually about 1% to 3% of the home value. On a $200,000 home, you can expect to pay taxes of $2,000 to $6,000 per year.
Homeowner’s insurance is normally not too expensive. It’s typically only a few hundred dollars, unless you’re located in a flood plain or some other high-risk factor applies.
5. Utilities. If you are coming from a rental situation, your total utility expenses will be much higher, since you’re now responsible for paying all of them yourself. Also, a home usually has more square footage that you need to heat up and cool down. You’ll pay for electricity, water, cable, gas, and a number of other necessities.
Think about these five costs because you’ve got to look at your budget to make sure you have the money available from a cash flow perspective to make the move and keep up with expenses. Remember, it’s always something. But these come up every year, so you don’t have to be surprised. Until next time, enjoy.
