First Time Home Buyer Mistakes – Failing to Understand the Cost of Owning a Home

Are you thinking about buying a house but not sure if you can afford to own one? Well, to be sure you would have to have thought about the true cost of owning a home. I’m not talking about the cost to buy one, that’s just the start of it. I’m talking about the cost to own maintain one over time. You need to have thought about and budgeted for that. If you’re not sure how to do that, keep reading.

I would like to walk you through creating a sample budget that represents an example of the cost of owning a home. Now, the actual numbers involved in this budget can vary depending on a lot of different factors. Consider your heat/cooling costs, for example. The type of home you live in, how well it’s insulated and the layout of the home (among other factors) can affect its energy efficiency and subsequent costs. So, keep in mind, this is just a hypothetical monthly budget. But you have to have somewhere to start. You can always add or remove budget items to tailor this example to fit your needs.

Our hypothetical monthly budget will be based on some national averages that I found in various, reliable places on the internet. If you want more personalized estimates of the numbers you’re about to see in this example, I’m sure it would be fairly easy to find more regional or even local county or city level numbers for these budget totals.

Let’s put together a sample monthly budget for a homeowner starting, of course, with a sample monthly mortgage payment, which will base on a hypothetical home purchase of $200,000 for the house, with a 20 percent down payment. This would result in a loan amount of $160,000. We’ll use six percent for the interest on the loan, $2,000 for your annual property taxes and $1,000 for your annual homeowner’s insurance. Using those numbers for our example results in a mortgage payment of $1,209.

Now, let’s add some monthly utility costs. Nationwide monthly averages for utilities are as follows: for electrical, $114, for water $71 and for natural gas $63. Internet, which I would not have considered a utility 20 years ago but now I think most people probably look at it that way, averages about $60 a month. Streaming, which to some might be considered a luxury, will be included here just to be conservative, costs consumers on average another $60 a month. If your trash is not picked up by your local municipality as part of the services paid for through your taxes, then it will cost homeowners on average $14 a month to pay for it themselves. All together that gives us a monthly utility budget of about $382.

Another possible monthly budget item might be HOA (home owner’s association) fees. If you buy a house in a home owner’s association monthly membership fees average $300 a month. Of course, you can eliminate that cost by just not buying a house that’s part of home owner’s association. 😊

As a homeowner, it is important that you budget for repairs and maintenance. I would advise that you set aside in your budget 1% of your home’s value for annual maintenance. You’ll inevitably need to attend to minor things like replacing fixtures, painting, landscaping, replacing window treatments etc. Slightly more costly items like replacing an appliance, like a dishwasher a refrigerator or something along those lines, will eventually be necessary. I would advise keeping any unused portion of that annual 1% set aside in a fund for larger repairs and maintenance, such as the need to replace a furnace, air conditioner or roof somewhere in the future. One percent of our sample $200,000 house would be $2,000 a year or $166 per month.

So, all together we have a monthly budget from being a homeowner of $2,057 per month. I hope this example helps to give you some direction in estimating your potential monthly homeowner budget. Hopefully you can use this plan to determine whether or not there’s room in your budget to include being a new homeowner.


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