Owning your own home is a wonderful thing. You can invest in your future, and have a roof over your head that’s truly yours. But if you’re ready to stop renting, and you’re looking for a home to call yours, there are a few things you should know – before you make the switch!
1. You’re Going To Be Paying A Lot Of Upfront Fees
The cost of buying a home is much higher than just paying a security deposit on a new rental. You will likely have to put down a down payment between 3-20% of the purchase price of your home, or purchase Private Mortgage Insurance (PMI), if you can’t afford a down payment, which will increase your monthly payments.
You’ll also be responsible for legal fees and closing costs, like home loan origination, land surveying, home inspection, escrow fees, and so forth – these average about 1% of the value of your home.
This is one reason why it’s usually only a good idea to purchase real estate if you’re planning on living there for more than a few years. It takes a while to “make back” the money that you have to pay in fees.
2. Your Monthly Payment Goes Beyond Your Mortgage
As mentioned above, you may have to pay PMI if you can’t afford a high enough down payment. You’ll also have to pay for homeowners insurance.
And don’t forget about property taxes. The average Florida homeowner pays about $1,702 per year in property taxes, so it may be a good idea to set tax money aside every month, so you don’t get surprised come tax season.
3. You’ll Want An Emergency Fund
An emergency fund ensures you have enough money to cover basics – your mortgage payment, food, and utilities – for 3-6 months. This is important as a homeowner than it is as a renter, because even missing a few mortgage payments can cost you high fees, and result in foreclosure, which can be financially devastating.
4. You’re Responsible For Repairs
An emergency fund is doubly important because when you own a home, you’re responsible for maintaining your own property. No more calling the landlord when something breaks!
A good rule of thumb is to set aside about 1% of the value of your home as a “maintenance fund”. This ensures you’ll have money for basic repairs like plumbing issues, and save up for more major things, like replacing furnaces and A/C units, fixing a leaky roof, and so on.
Ready To Make The Switch?
At RE/MAX Experts, we use our years of experience to help first-time buyers navigate the exciting – and intimidating – world of home ownership. So let us help you! Get in touch with us now, and start shopping!