When purchasing a home, the largest expenditure you will have is the down payment. This payment can range from zero, if you are a veteran, to 3.5, 5, 10 and even 20 percent. When you get a mortgage, you will also get closing costs which will add another 2-4 percent that must be paid in cash at settlement.
Most lenders will require you to set up an escrow account from which you will pay the property taxes and homeowner’s insurance when they are due. As a rule, the lender will require one to three months of taxes and one month of insurance so they can be paid before the due date.
It is important for first-time buyers to be aware that they will need this extra amount of funds available when purchasing a home. Unlike when you are renting a home, homeowners are responsible for repairs and you should have the funds available to pay for them when needed.
A brand-new home will have fewer repairs than an older home. But there will come a time when components like the furnace, A/C or appliances will need to be replaced. This can crush a homeowner’s budget if you are not expecting it.
Homeowners should expect between one and four percent of the value of the home in annual repairs. The age and condition of the home and whether some of the items have been replaced will help assess the anticipated expenditures.
A $175,000 home with 2 percent estimated repair expenditures would be $3,500 a year or about $300 per month. Some years, it may not run that much and other years, it might be more. By anticipating the maintenance expenses, a homeowner is more likely to handle things when they arise.
Purchasing a home warranty is another way to handle the risk of unexpected repair expenses. For $500 -700 a year, repairs and sometimes, replacements will be handled by the protection plan. If you are looking at buying a home, some sellers will offer a home warranty as a selling incentive to cover the first year the new owners are in the home and give some peace of mind. Getting a home inspection should go along with this so you will know ahead of time what major or minor repairs are on the horizon.
Call me at (703) 404-3010 for a list of trusted home warranty providers available in our area.
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