Buying your first home soon? Here are 8 things to consider:
1. Budget: Be smart with your budget if you plan to finance your home. Just because an online calculator says you can afford a particular house payment, does not mean you actually can. Make sure you are taking a full consideration on your cash flow and the real costs of owning a home. A mortgage payment covers only your principle and interest, but you will be responsible for home insurance and government taxes, so make sure you calculate those as well.
2. Private Mortgage Insurance: Whenever you purchase a home and you put less than twenty percent (20%) of the home equity as a down payment, most lenders will require private mortgage insurance (this would be in addition to your homeowners insurance and government taxes). Private mortgage insurance protects the lender from loan defaults. The monthly cost of private mortgage insurance will depend on your lender and how close you are to the 20% number. Depending on the cost it may be smart to adjust your budget so you are able to provide at least 20% as a down payment.
3. Homeowners Insurance: Again, if you are financing your home you will be required to carry homeowners insurance. Homeowners insurance protects your home from major catastrophes. According to the latest information available from the Insurance Information Institute, the average home insurance premium costs in 2011 were around $978 per year; and costs increased in 2012 by 6% and by 11% in 2013.
4. Government Taxes: In Arizona property tax provides funding for schools, parks, and sidewalks. Make sure to look at the current annual tax rates for the home you are interested in and find out when the next assessment will occur. You will want to know if your rates will be increased by the sale of the home.
5. Annual Utilities: Water, gas, electricity, trash…what will they cost you? When you have found the house that you want to make an offer on, ask the homeowner for a years’ worth of utility bills. Keep in mind that your exact usage may differ (i.e. family size, home use), but use this information to gage average monthly expenses to keep the home operating.
6. General Maintenance: Homes, like anything else will need general upkeep over the years. Buying a brand new home may save you a few years for major appliances, but there are no guarantees. When buying an older home, make sure to have a qualified home inspector give you an overview on the life expectancy of important elements of your home, such as the roof, air conditioner, heating, plumbing and electrical work. Also consider upkeep costs for pools, decks, landscaping, painting the exterior of the house. Remember YOU are the landlord, so when something breaks, you will be grateful you budgeted appropriately.
7. Making it “My home”: This is the deepest pocket you will need to watch. When you move into your new house, you want to make it “your home” – this could include anything from new furniture because your old stuff doesn’t fit right, to ripping out carpet and replacing everything with tile or wood floors, to buying new art pieces to ‘just make this room’. This can be a slippery slope and definitely something to remember whenever you move.
8. Other Expenses: Are there Home Owner Association fees? Security system? There are many expenses that don’t quite fit anywhere else, including life insurance. Make sure you are covered when it matters most.
If you are thinking about buying a home, and have additional questions about homeowners insurance or life insurance options. Please contact us today!
Cambridge Insurance Services: 480-409-0500
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