Medium/Long term prep for first house purchase

[auron]

Hi all,

I'm trying to get a handle on the real cost of home ownership and what I should be saving/planning for. Hypothetically what kind of payment would you expect for a $125,000 town house (20% down) assuming excellent credit (775+)?

By my research I'm thinking would look like the following:

Mortgage pmt (30yr fixed) 600
Home owner's insurance 55
Property Tax 250
Maitenance 100

Total: $1005/mo

Does this seem realistic? Or am I missing an important factor?

[bjl584]

The mortgage estimate is probably about right, depending on interest rates.

Taxes and insurance vary greatly based on where you live. You can make a few phone calls and find out exactly what those figures will be on said property though. The realtor will have the tax numbers. You can call an insurance provider and get a ballpark number.

Maintenance will depend how old the house is and how much work you need/want to do.

Important thing is to make sure that you have a 6 month emergency fund in place when you buy. Also, make sure the house doesn't cost more than about 3 times your annual income. Stick to that, and you should be fine.

[Gailete]

Moving into a new/old house can mean many extra expenses that you tend to forget about. Is this brand new construction that you will need to buy towel racks for the bathrooms, shower curtains and rings, mini blinds and window treatments. Even simple homemade curtains need hardware, Will you need to buy new appliances and if the appliances are already there, how old are they? How old is the furnace, hot water heater, AC and when might they need to be replaced? Will you need to pay an extra fee to get the gas, electric and landline put in? Does the new house have a deck that will compell you to buy a grill, table and chairs for outside entertaining, that happens once after you buy the stuff or do you then live outside all summer (one scenario you didn't need to fork out for and the other you pat yourself on the back for spending what you did)? Are you going to replace all your towels and washclothes since the old ones now look scuzzy against new walls. Will you need to paint rooms? Will you need to do landscaping?

It just goes on and on. In reality, you can put out thousands of dollars just the first year you move in if you don't think about it ahead of time. Be prepared is my advice!

Oh yes, I just remembered the other big expense and that is moving costs unless you and some friends own some trucks and you have some hefty friends to help you move. You will need to rent a truck and possilby rent guys to help you move which costs and even if friends help, you need to feed them and keep them hydrated. In the midst of moving and packing and settling in, you may also find yourself at restaurants frequently because your kitchen is dismantled or you are too exhausted to think about cooking. You never think that those extra meals as 'moving expenses' but they are. By now do you understand that I have moved WAY too many times?! Never had enough money when moving and rather than pay for things I couldn't afford went without while seeing everyone else seemingly having the money to do these things, because the minute they moved they have everything new. I kind of doubt that they really saved up for all the new stuff.

[witchkizzle]

For a true-to-life example of your situation, consider this:

My wife and I bought a house in March.

Home price - 124,900 (put 20% down)
Interest rate - 4.125%
Mortgage term - 30 year fixed

Principal and Interest - $484

Tax and Insurance is relative to your area and situation, but this is ours

Homeowners - $133
Mandatory flood (for a street that has never flooded once in man-kind's recorded history ) - $58 <--- i hate paying that

Taxes $158

We do our own escrow since we put 20% down. So including our own escrow our minimum payment is $833 a month. (we moved from an apartment where rent was $910 a month!)

I know rent vs mortgage is not a good comparison to make because of the costlier repairs and such a home brings, but still it was a good switch.

[BMEPhDinCO]

"Hi all,

I'm trying to get a handle on the real cost of home ownership and what I should be saving/planning for. Hypothetically what kind of payment would you expect for a $125,000 town house (20% down) assuming excellent credit (775+)?

By my research I'm thinking would look like the following:

Mortgage pmt (30yr fixed) 600
Home owner's insurance 55
Property Tax 250
Maitenance 100

Total: $1005/mo

Does this seem realistic? Or am I missing an important factor?"

We bought our house for $125k 3 years ago. We put down 20% ($25k) and got the mortgage for 30 years at 5.5% (remember, 3 years ago) for $100k. We pay $750 a month, which includes:

$570ish for payment
$90ish for taxes (this changes with the economy)
$90ish for insurance (they raise this periodically)

we also budget $100 a month for minor things (veggie garden, most recently) and $200 a month for major things (we just paid $1,100 to fix our heating in January).

We paid around $8k-10k for a new roof right after we moved in. We also redid our bathroom after 1 year for around $6k-8k and did flooring, painting, new washer & dryer, new dishwasher, etc that was another $6-10k over the last 3 years.

If you bought before they raise the interest rates, you could expect a payment of $50-100 lower but taxes & insurance will be very dependent on where you live. You can get an estimate of that from the city, just call and ask and for the insurance, look it up online, they will give you a range, or call state farm and ask for an estimate for the area.

In general, expect to pay 10% above the 20% for the first year in "oops, didn't think about that" kind of things, EVEN if it's a new house (ours was older). If you want to pay your mortgage faster, take that into account as well.

Hope that helps, good to you for thinking of this stuff in advance!

[elessar78]

Consider raising your deductible for homeowners to reduce your premium. In theory, and someone please correct me if I'm wrong, homeowner's insurance is for catastrophic events. So try to be self-insured up to a certain limit. Our policy has a $5,000 deductible for example.

I'm going through the process now and I def could've done more research before we started looking.

Know how mortgages work as much as you can and what entities can give you your loan.

[auron]

Disclaimer: I do not own nor am I actively looking to buy a house. I am just making a plan that will put me into a position to be able to in about 5 years.

Really I'm looking to estimate the EF/Downpayment and the recurring expenses for home ownership. I found the property tax based on past years of houses in the $125k range for my area and rounded up.

My current plan goes like this:

Basic 6 mo EF: $9000
Housing 6 mo EF: $6030
Downpayment (25k): $25000

Baseline Cash on hand: $40030
Total cash on hand req'd (Baseline*1.25): $50037

There will be other costs for moving, appliances, and things I've missed, but right now my +25% extra is for those uncaptured costs.

[Petunia 100]

Auron, if you're buying a townhouse, your home will also have a homeowner's association (HOA), with dues. Before you buy a particular home, check out the HOA. You want to know if they have been setting aside money for big maintenance projects or not. If they haven't, when those projects need to happen, they will hit all the homeowners with special assessments. You also want to know if they are using the dues wisely. Read the minutes of at least the past year, so you know what is going on in the community.

[elessar78]

Another preparation is to "live" in this 125K house from a budget perspective. Just plan your budget for the mortgage payment, utilities, and maintenance costs associated with the new house. Just save the difference between your actual payments from the theoretical payments.