What Does It Cost to Buy a Home?
As the saying goes, you do not want to be house rich and cash poor, so it is important to consider all of the costs of home ownership before you buy. Spending more than you can afford on a house, is one of the most troubling financial mistakes you can make. Your home should be a peaceful place where you can relax, not a source of stress and worry.
Generally, a 20 percent down payment is recommended, but depending on your needs, you may want to put more money down so that you can have a comfortable monthly payment with cash to spare.
Budget for your monthly payment. A good rule of thumb is to avoid spending more than 30 percent of your income on your monthly rent or mortgage. For example, if you make $50,000 a year after taxes, spend no more than $1,250 on your rent or mortgage including property tax.
Factor in taxes. Both Oklahoma and Texas have property tax, and it varies based on your home value and county.
Buy insurance. As you are calculating your monthly budget, also include the cost of home insurance and flood insurance. Flood insurance is not covered by your home insurance policy, and you may need it where you live.
Save for repairs. Appliances break, roofs leak, foundations crack. These repairs and more are a regular part of home ownership. Save about 1 percent of the home purchase price for home repairs. For a $100,000 house, you will want to have at least $1,000 saved for major home repairs. You could also consider a home warranty, but include this amount into your budget as well.
Plan for upkeep. Outside of repairs, you will also need to plan for regular upkeep to help maintain your home’s value. This can be installing new carpet, buying a lawn mower, painting shabby walls, and more. Some of these tasks you can do yourself, but it is important to remember that the materials cost money and it takes time.
Understand appreciation. Over the years, your home may increase in value, but during that time, you will need to maintain the property with regular maintenance and repairs. Do not expect a big pay off in just a few years.
Be in it for the long run. The cost of interest, realtor fees and moving expenses add up fast, so plan to stay in the same house for a long time, and find the best home you can for your long-term needs. If you’re planning to have children, expect to take care of an elderly relative, or need a home office, it’s a good idea to choose a house now that has the space grow in to—as long as the cost does not exceed your budget.
Buying a house is part of the American dream, but a comfortable budget will give you the sweetest dreams of all.