Four Hidden Things That Affect Home Affordability

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Four Hidden Things That Affect Home Affordability

Smart buyers carefully review their financial status and budget before deciding how much house they can afford. It also makes sense to get pre-qualified with a mortgage lender so that you can narrow down the price range based on affordability. By taking these steps, you are well on your way to making an offer on a home that you can easily manage to pay for, but there are some hidden expenses that you may have overlooked. Before making an offer on an appealing property, explore how these factors will affect your budget.

Utilities Expenses
Your budget understandably already includes line items for electricity, water and gas. However, these expenses could change drastically when you relocate. The specific rates for the new home may be different, and your usage may change. Consider that the size of the home and how well it is insulated can affect energy costs. One of the easiest ways to estimate utilities expenses is to request a 12-month usage history from the utility providers or from the current owner.

Monthly Payment Add-Ons
If you are buying your first home, you may not be aware that your monthly housing payment usually includes escrows for property taxes and insurance. In some cases, these expenses can add a few hundred dollars or more to the payment. If your mortgage payment does not include escrows for these expenses, they will be your independent responsibility. Mortgage payment insurance and HOA dues also need to be factored into your budget.

Landscaping and Yard Care
Unless you are moving into a condo or townhouse with an owners’ association that pays for exterior property maintenance and lawn care, you should include these expenses in your regular budget as well. Lawnmower and other equipment maintenance, fertilizer, water, pesticide, mulch and other expenses can add up over time. You also may pay for professional lawn care services, gutter cleaning, tree trimming, and other services.

Maintenance and Repairs
All homes require regular maintenance, and they will need various repairs over the years as well. Maintenance may include an annual HVAC system tune-up, resealing doors and windows, cleaning grout, resealing a wooden deck and more. Roofing, plumbing, electrical system, HVAC system and appliance repairs may also be more frequent and expensive than you may think. Some homeowners make regular contributions to a dedicated account each month, and this account is used to pay for home repairs and maintenance work.

When you fail to budget properly for these expenses upfront, you may find yourself in a home that you cannot comfortably afford. Research these expenses as well as possible before making an offer on a new home. In addition, leave some wiggle room in your budget to account for variances.