Interest rates remain historically low, and according to Trulia's latest Trends Report, homes are affordable for the middle class in 80 out of the 100 largest metros. But let's put it all on the table, just so there are no surprises: if you plan to purchase a home this summer, next summer - or ever, you're committing to costs both upfront -- and after you own. Home ownership is a major financial commitment, so you need know exactly what those costs are in order to be prepared.
When making the decision to buy, the most important component is determining what you can afford. So many first-time buyers make the critical mistake of assuming that if they can afford the mortgage payment each month, they can afford the house. But that's only one piece of the puzzle.
Financial output does not stop the moment you walk away from the closing table, so make sure each of the following eight expenses are entered into your monthly housing budget.
1. Mortgage Payments
You'll be able to figure out in advance what your monthly payments will be based on the price of the house, how much you're putting down, and the interest rate you're paying. Give Trulia's Mortgage Calculator a try by clicking here.
2. Property Taxes
These are usually paid twice a year, but the property tax laws vary state by state and even by county. In Hunterdon County, New Jersey, for example, residents pay about 1.89 percent of their home's value to property taxes, while in Westchester County, New York, homeowners pay about 1.45 percent. California residents, on the other hand, enjoy lower property taxes -- typically around 1 percent of their original purchase price.
3. Homeowner's Insurance
This varies by state and region as well. Depending on where you live and what kind of coverage you buy, insurance can run you anywhere between $500 and $1,500 a year. It helps to bundle your homeowner's insurance with other types of insurance, like auto and life, as many companies offer discounts for doing so.
4. Hazard Insurance
This entails coverage for earthquakes, floods, or hurricanes, depending on what area of the country you live in.
5. Condo, Co-op, or Homeowners Association Fees (HOAs)
If you own a condo, co-op, or town house, you'll pay an annual or monthly fee to maintain the building and grounds. Single-family homes may also have dues if they're located in a particular neighborhood or subdivision with common property. If you purchased in a gated community with security guards, a swimming pool, clubhouse, playground, tennis courts, and so on, you're likely to incur regular expenses for those amenities.
You're probably paying them as a renter anyway, but chances are, you may have a few extra bills -- including gas, water, sewer, and trash removal, in addition to electric -- and they may be a bit more costly now that you're running an entire home.
7. Routine Maintenance
Things break, things wear out, and unplanned expenditures pop up. It happens. You'll want to keep some emergency money handy for a leaky roof, clogged kitchen sink, or dripping hot water heater. Budget a couple hundred bucks a month for these "unexpected" costs.
8. Pool And Yard Care
Depending on how much there is to maintain, you'll need to earmark extra dollars to cover routine outdoor expenses. Even if you decide to take care of your pool or large back yard yourself, you'll still need to hire professionals from time to time for heavy-duty tree trimming or the occasional repair of your pool's filter system.