Owning a home is a dream for many of us. I´d like to own a home some day (click here to see why I don´t: Why Am I Still Renting?). However, responsible home ownership does not mean that you can just walk right out and buy a home. If you are looking to purchase a home in a manner that leaves you financially solvent, it takes good financial planning. And part of that is looking at the costs associated with home ownership and determining if you really can afford it.
It is true that you can get away with rather small down payment these days. However, the smaller your down payment, the bigger your loan. And, if you do not put down 20 percent, you will likely have to pay mortgage insurance each month as well. You can get out of mortgage insurance by taking out another loan, one for 20 percent of the price, and using that as your "down payment." But then you basically have two loans on your house already. Carefully consider how close you can come to making that 20 percent down payment. The smaller the amount you can borrow, the better. You can save tens of thousands of dollars in interest fees.
Many people neglect to remember property taxes when they get that home loan. Some mortgage loans roll property tax payments into the loan itself, which can be helpful, while others just pay their taxes on an annual or semi-annual basis. However, you should realize that as your home´s value increases, so will your property taxes. People who find themselves in a market that grows rapidly often find that what they could afford to pay in property taxes when they moved in skyrockets out of control as the county assessor decides that the home is worth twice its value in a period of only a few years. If you are looking for an investment property, this is great. If you are looking for a home, an area on the verge of a major boom could be real problem.
Maintenance costs of home ownership
Once you buy a house, the costs do not just stop. You are responsible for maintaining your home. If something breaks, you have to fix it. You should always have some substantial savings available for home repairs so that you can make them as needed. Fixing up a home can be a lot of fun, but it can also be expensive. Figure out whether or not you will be able to afford to keep your house up if you buy one.
Other costs include homeowners insurance, fire insurance and flood insurance, as well as closing fees and inspection fees. Buying a house is a big decision, and while it is also a rewarding decision, you need to make sure that the financial planning is in place so that you can afford to keep the house once it is yours.