Home Buyers Guide > What It Costs to Own a Home

What It Costs to Own a Home

by Stacey Bradford posted Oct 21st 2010
What It Costs to Own a Home Video

Few things are as exciting as buying your first home. But before you become a homeowner, it's important to make sure you have a clear understanding of all of your monthly expenses so that you can determine what you can comfortably afford.

Remember, you're the landlord now, and that means you need to cover everything from the town taxes to fixing a leaky roof, including those unexpected emergencies.

Let's put together a budget so you can get a better idea of how a mortgage payment could fit into your overall financial picture when you consider your income, your current debt (like credit cards and auto loans), and your savings.

A Homeowner's Budget

Here's a rundown of typical expenses a homeowner needs to budget for, in addition to monthly mortgage payments.

Insurance and Taxes: Right off the bat, homeowners have two big expenses they need to prepare for –homeowner's insurance and property taxes. Both of these are usually included in your monthly mortgage payment through an escrow account, which might be required by some lenders.

An escrow account works like this: each month, you place your prorated property tax and homeowner's insurance payments into a holding account that's managed y your lender. When these bills are due 7ndash;–usually once or twice a year ndash;–your lender makes the payments for you by withdrawing the appropriate amounts from the escrow account. If you don't have an escrow account, it's a good idea to put some money away each month in a savings account to cover these payments.

To help you budget, according to the National Association of Insurance Commissioners, the average homeowner's policy costs about $820 a year.

The second item is property taxes. To estimate the property tax before you buy a home, call your county tax collector office or visit their website. They should be able to tell you the property tax rates that are applicable to your area.

Keep in mind that taxes and insurance are determined, in part, by where you live. They will also fluctuate based on the size and value of your home.

Utilities: Utilities are next on the list. Be prepared to pay for everything from electricity and gas to water. Even if you paid this on your own as a renter, don't be surprised to find your bills are now higher if you're moving from, say, a one-bedroom apartment to a four-bedroom home.

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