As you look for a home, shopping around and getting documents together for pre-approval, it is easy to lose sight of some of the costs involved with home ownership. There are costs associated with getting the mortgage, and then there are on-going costs that you have to be prepared to pay. While you are looking at how much home you can afford, and wondering if you are adhering to the 30% rule, don’t forget about some of the costs that might be included in your ownership of the home:
Mortgage Loan Costs
Some of the costs that come with buying a home are related to borrowing the money itself. Just the act of getting a mortgage makes the largest purchase you are likely to make even larger. Here are some of the costs and fees you might be charged when you get a home loan:
- Origination fee
- Documentation fee
- Credit report fee
- Title fee
- Inspection fee
- Attorney fee
- Other administrative fees
Of course, the lender is suppose to disclose these fees. But that doesn’t make paying them any more palatable. You can reduce your long-term costs by paying points up front. You have to come up with the money now, but if you will be in the home for awhile, it can be worth it to get the reduction in interest rate.
Costs Related to Owning a Home
Next, you have to consider the costs associated with owning a home. There are a number of recurring costs that you can expect with home ownership. Some of these regular costs include:
- Regular maintenance, including yard work and yard maintenance
- Homeowners insurance
- Private mortgage insurance (PMI), until you have more equity in your home
- Property taxes
- HOA fees
Some of these costs (like insurance and property taxes) are often added to your monthly mortgage payment, making it a little easier, and more convenient, to ensure that they are paid each month.
Of course, not all costs will be applicable to you. You might have some of the fees associated with closing your mortgage loan waived, especially if you have good credit
and the lender is looking for more borrowers. Depending on where you live, you might be able to pay lower property taxes, and not everyone is subject to HOA fees. As you estimate the costs of owning a home, make sure you are realistic. Do some research, and get a true idea of what it might cost to own a home.