This question (“how much house can I afford?”) crosses everyone’s mind at some point in their life… in many studies, it’s “home” that people find most valuable, even more so than food often times. Having a place to go at the end of the day is nearly priceless.
However, there’s a price tag attached to this place we call “home”. Let’s dig into the costs associated with Buying a Home (and then owning it).
**DISCLAIMER** – every situation is unique so this is just one example.
One of the very first steps is to speak with a loan officer to become ‘pre-qualified’ for financing and a Home Mortgage, but that doesn’t tell the whole story. You could be qualified for up to $300K, but not be able to afford the payment that comes with it. Everyone should have a household budget completed up front to know where your comfort level really lies.
Then, when you speak with the loan officer, they’ll lay out the various loan programs / options available to you and coinciding payment scenarios.
Each payment is comprised of several items… most commonly:
- Principal
- Interest
- Homeowner’s Insurance
- Property Taxes
- Mortgage Insurance (if applicable)
- HOA (if applicable)
Remember that taxes, insurance and HOA will vary by property, which is where a good Realtor will be able to compute that for you onsite, before you offer.
In addition to this monthly “mortgage” payment, you will have utility costs (water/sewer/trash, electricity and natural gas) plus maintenance. Landscaping, pool care and small repairs can all fit into the latter category.
Let’s go back to the buying process again for a moment… in addition to whatever down payment you decide, there are ‘closing costs’ involved too. These can include, but aren’t limited to:
- Escrow Fee
- Title Insurance
- Recording Fee
- Lending Fees (Underwriting/Processing/Discount Points)
- Tax Prorations
- Homeowner’s Insurance
- HOA Dues & Transfer Fees
- Home Warranty
Not all transactions are considered the same, but on a $250,000 home purchase, we see an average of about $5,000 in closing costs. Outside of these and normally paid by the buyer during escrow would be inspection and appraisal. These often add up to about another $1,000.
Needless to say, it’s a journey and some big decisions need to be made in order for ultimate success. That’s where having a true Real Estate Advisor is crucial. We are not Sales People… we are advisers and consult with our clients up front to provide accurate information so the right decisions can be made.
We would love to help you too!
