It can take months—even years—to prepare enough to purchase a home. If you've been renting your entire life, however, there are some things you may still overlook. Here are two things renters often fail to plan for when buying their first homes.
Higher Costs for Utilities and Services
Possibly the most common thing renters don't consider when creating their budgets is that their utility bills will typically increase. This, of course, depends on the size of the living space. If you're moving from a 1,500 sq. ft. apartment to a same-size home, then you may not see much of a marked difference. On the other hand, if you're moving from a 1,000 sq. foot condo to a 2,500 sq. ft. multilevel home, then you're likely to see a marked difference in the amount of energy you're paying every month.
Additionally, your landlord likely paid for (or at least subsidized) some utilities and services, such as water, trash removal, and lawn care; all things you will now be responsible for. To minimize the risk of experiencing budget shortfalls every month, ask the current owners how much they pay for utilities and plan accordingly.
Another good thing to do is to talk to your realtor or other homeowners about the type of expenses you should budget for in your new home. For instance, you should put money into a repair fund for when appliances eventually break and need to be fixed.
The second issue renters may not be prepared for is the payment of property taxes. However, this may be an issue you won't actually run into until you've completely paid off your home loan. This is because many mortgage companies will build the cost of property taxes into your monthly payments and pay them on your behalf at the requisite time. It's not unusual for people who paid off their homes after 30 years to lose them to the government for back taxes because they didn't realize those taxes became their responsibility after they paid off the bank notes.
If you paid cash for your home or your mortgage company doesn't collect the money for taxes, then you'll need to budget for this yearly bill. The amount of tax you pay is based on the value of your home. You can typically find the property tax rate by contacting the assessor's office or visiting their website. Multiply the tax rate with the current value of your home to get your estimated tax bill and then divide that number by 12 to get a monthly amount you should set aside.
For more information about new homes for sale and other costs of homeownership you may be overlooking, contact your real estate agent.