Becoming a first-time homeowner can be an exciting prospect, but a home purchase is one of the most expensive investments a person may make in their lifetime. Understanding exactly what to expect is critical to making the wisest financial decision during this pivotal home-seeking process. When searching for your first home, be sure that you understand the hidden and unexpected homeownership costs new buyers should know about; these fees can directly affect your purchasing power and your long-term financial comfort.
Property Taxes
Both residential and commercial property is taxed; the proceeds of which go to fund various services such as schools, safety, spaces, streets, sanitation and services, depending on where you live. Your annual property taxes are often combined into your mortgage payments through your loan provider. Keep in mind, as you look for a home, that property tax rates are heavily dependent on your location as well as your home’s overall value.
General Homeowners Insurance
Your homeowners’ insurance rates are dependent on a few factors; finding the best rates will often involve bundling your home and auto policies together through your preferred insurance provider. Standard homeowners’ insurance policies cover most disasters and liability. However, homeowners’ insurance will not cover earthquakes and floods.
Additional Insurance
If you live in a floodplain or an area prone to flooding, you will likely be required to purchase an additional flood insurance policy. Standard homeowners’ insurance does not cover damage resulting from land movement or landslides; if you live in an area prone to earthquakes or want to feel extra secure in the event of a disaster, FEMA has proactive insurance planning advice.
Utility Rates
Utilities vary by location and by household. Understanding the utility rates of the previous homeowners’ can give you a good ballpark of what to expect when moving into a new home. Additional investments into solar, weatherproofing and energy-efficient appliances can be an upfront cost that may provide worthwhile long-term savings.
HOA Fees
If you purchase a home within an HOA, you’ll face additional fees. Fees can vary significantly from one HOA to another, and some will be more aggressive in applying fines than others, so be sure to do your research before making a commitment. While HOAs can offer many benefits, they charge monthly or annual fees to cover things like maintenance and management costs. HOAs are also allowed to charge fines or special assessments for a breach of regulations or to cover unexpected expenses such as repairs or improvements.
