Buying your first home may seem like a smart move right now.

With home prices on the rise, you might be thinking it’s time to take the plunge while interest rates remain low. It’s even more tempting when you compare a friend’s or family member’s mortgage payment to your monthly rent.
 The price of homeownership, however, is made up of other recurring expenses that aren’t always so obvious.

Here are eight expenses budget for:

1. Mortgage payments
If you finance your home, your monthly mortgage payment will go toward the principal (the amount you originally borrowed) and the interest on that principal. The amount of your payment will depend on how much you borrow, the interest rate on your home loan and the amount of time you have to pay off the loan.
Added to your monthly mortgage cost could be a payment to build an escrow, or reserve, account. Escrow accounts allow you to save incrementally for homeowners insurance and property taxes.
Lenders keep this money on deposit, and pay local governments and insurance companies when those bills are due.

 2. Private mortgage insurance
 If your down payment is less than 20% of the home’s price, you usually are required by the lender to take out a private mortgage insurance policy. This policy protects the lender in case you default on the loan. According to the trade group Mortgage Insurance Companies of America, for a home costing about $200,000, the monthly premium runs between $50 and $100. The closer your down payment is to 20%, the lower your monthly cost for PMI.
 You may be able to have the PMI removed when you reach 20% equity. Often, you’ll have to request this from your mortgage provider.
3. Homeowners insurance
“Homeowners insurance is critical in ensuring you’re able to cover rebuilding, repair or replacement costs in the event of a major catastrophe or theft,” says Halliwell.
4. Property taxes
Local governments charge real estate taxes to pay for public expenses, such as schools, parks and sidewalks. The seller or seller’s real estate agent can tell you the current annual tax on a property. “Also ask when the next tax assessment is scheduled and whether it will be increased by the sale of the home,” suggests Halliwell.
5. Utilities
Once you find the right house, ask the seller for a record of a year’s worth of utility bills.
6. Maintenance
When you own a home, there’s no landlord to call if it needs repairs. A qualified home inspector can walk you through the condition of a residence before you sign on the dotted line.

7. Making it a home
 “One of the biggest categories I’ve seen catch people off-guard is what I call ‘making it mine’,” says Halliwell. You might fall in love with a house, but when you move in, your furniture doesn’t fit, you don’t like the kitchen counter or you’d prefer wood floors to carpet. “You could easily spend thousands of dollars if you’re not careful,” Halliwell warns.
8. Other costs to consider
Whether it’s a home security and monitoring system or weekly trips to the local home improvement store, make sure you have the money to cover it by building some wiggle room into the budget for your new home.
You’ll also need to factor in HOA fees if you purchase a condo or town house or move to a community covered by a homeowners association.

Finally, don’t forget about the cost of purchasing extra life insurance. For many families, having enough coverage to help pay off the mortgage should something happen to a significant chunk of its income is a necessity.

(Content provided courtesy of USAA.)



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