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The real cost of buying a house/ What you wish you knew when you bought your first house

I'm in the process of trying to put together the a realistic budget for what it would cost to own a house versus rent as I do now. Any advice on all the little things that you have to pay for that you don't have to worry about in a rental? Big purchase that you had to splurge for in the first years of homeownership that suprised you? Horror stories are appreciated.


  • I LOVE our house. It makes me smile when I come home from work. I did not like being a renter (it always made me anxious, and finding a rental that allowed pets was really tough). I also really wanted to put in a garden, although I have friends in rentals who garden like crazy so it's not necessarily an either or thing.

    That said, it is not cheap. And from a purely financial point of view, we made a lot of mistakes. I will share them, embarrassing though they may be, so you may learn from them.

    - We put too little down. We only put 3.5% down and as a result are paying PMI (private mortgage insurance that insures our lender against our defaulting). It is a huge waste of money. For us, PMI is $200 a month and if we just paid the minimum, we'd be paying it for 10 years. We are saving as much as we can to pay down our mortgage and refinance out of it early.
    - Our house needs a new sewer line. That's an $8-10k project we're saving up for. There can be major projects you don't want to DIY, like a roof or a sewer line. Inspections can't catch things they don't see. (But you can get a sewer line inspection!)
    - Even minor fixes like replacing a hot water heater still cost about a moderately expensive car repair.
    - While the house's listing price was within our budget, taxes were more than twice what we had budgeted. I fell in love with the house and the location so we went for it, but it was a difference of about $300 a month.

    The good? We've been very fortunate in our careers and my husband in particular has more than doubled his income since we bought our house a few years ago. But if that hadn't happened, it would have been more stressful. In retrospect I wish we had found a nice, comfortable rental and saved for a few years.
  • We JUST bought our first home, and in our area, even with PMI (which we are paying), the monthly payments on our house are the equivalent of a decent 2-bedroom apartment. We've rented for less, but it was also in a terrible part of town :)

    One thing that has me a little less freaked out about major house expenses is the home warranty that the seller's paid for at closing. It is supposed to cover all kinds of repairs with a $60 fee each time we use it... So we'll see how that goes! I'm optimistic :) We plan to renew it each year ($500 cost), since our realtor advised us that it was definitely worth it.

    I feel totally naive about this new homeowner thing, but for us it is totally worth it to finally have a backyard, all the extra square footage, and not share too-thin walls!

    The way I looked at it, when we rented we were "throwing away" every penny of our rent. Now, even with PMI, we are [hopefully] investing most of our monthly payment. Worst case scenario we are "throwing away" roughly the same amount each month that we would have if we continued renting :)
  • I wish someone had told me that getting homeowner's insurance on an older home is not easy and can get expensive (more than half of my monthly mortgage payment goes into escrow to cover FHA mortgage insurance premium, homeowner's insurance premium, and property taxes). I bought my first house a year ago and getting homeowner's insurance has been an ongoing nightmare. I had trouble finding a company that would issue a policy on my home in time for closing (house was built in 1957). I finally got a policy but it required an additional home inspection designed for a homeowner's insurance policy (required for homes over a certain age) and additional repairs to be made before the policy would be issued.

    Then about thirty days after closing, I received notice that the company was cancelling the policy and giving me a mere twenty days before the cancellation date (cancelled because of trees!). It turns out that an insurance company can do a site visit to the insured property within the first month or so after it issues a new policy and cancel your policy if the agent does not like something about the property. It took a couple of days, but I found a new insurance company. Of course, the new company required the entire year's worth of premium to be paid up front before the previous company had even refunded me the money I had prepaid at closing for its year's worth of premium. So now my homeowner's insurance premium is double what my real estate agent told me it would be.

    Also, I wish I had known about the costs of doing yardwork. I had to buy a riding lawn mower because my yard is just too big to use a push mower (.40 of an acre). I had no idea that they would be $900+ new and finding a used one for under $500 in good working condition is impossible.
  • I think everyone else covered a lot of what I would suggest but my biggest one I tell anyone I know buying their first house is remember ALL the expenses - gas and/or electricity, water, cable, internet, etc. Many of those things are included in rental fees and you don't think about when budgeting for the house. Also check if you have any home owners association fees. Our first house did and we didn't realize it right away so it was a VERY unexpected cost.

  • edited May 2013
    Don't forget about property taxes (rates and laws vary depending on your location), Homeowners Association fees if applicable (I have to pay two), special city taxes for projects, savings for repairs, homeowner's insurance, special insurances (umbrella, earthquake, flood, etc...), rules for the community.

    Live with your house as is for as long as you can so you can get a feel for how you really want your home to function.

    Be thankful for your home.

    My monthly budget when I first bought my house left me with $1.67 after paying everything except groceries & gas - I had no money for those but luckily my family lived close by and I could "shop" in my Dad's pantry and he would fill my tank up for me!!
  • Hello, sounds like an exciting time for you :) my advice is similar to the above - buy well within your means & make sure your budget accounts for worst case scenario's. Another tip is to add up all your yearly expenses - food, gas, power, mortgage, phone, house insurance... etc etc & divide by months or fortnights, then check to see if you have enough left over funds to live happily (have spending money for yourself, holidays etc) as well as having spare cash for the breakdowns etc. good luck, it will be well worth it :)
  • One thing I haven't seen mentioned is to make sure you have an emergency fund saved up for the house. That way when things like the hot water heater break down, you have the money to put in a new one ASAP without having to run up your credit card.
  • I had built my first house and felt peace of mind with everything being new. I was wrong-my air conditioner broke, one of my windows leaked, and other odd things that weren't covered by the warranty. I now live in a older house and love it! I made sure to find one that was in my budget and was livable, meaning I didn't have to fix or update anything to be able to live in it. Everything I do to the house is mainly cosmetic and as I have money. It's just me, so I am doing everything on 1 income. Good luck!
  • The only other advice I can offer other than what has been said is avoid large trees if you can. Right now the trees look so green and pretty, but come fall you will be enslaved to raking (or have the budget for a lawn service - which here is @ $50/wk to rake leaves.
    Also large trees block out sun and will make growing grass difficult. Tree roots grow into your water lines, and if close (which for a large mature tree close can mean within 25 feet) to your house, driveway, patio, etc. can grow under and damage the concrete of your foundation, or driveway, etc. Also branches can fall on your house in a storm. Like a previous poster said insurance companies aren't crazy about big trees near your house. They also attract squirrels and you don't want them getting into your attic.
    And trees are suprisingly expensive to maintain. A good sized tree can cost several hundred dollars to have trimmed and that needs to be done every other year or so.
    They do provide shade and can lower cooling costs in the summer, but in our first house, my experience has been that the 6 (yes 6!) mature trees on our small lot have mostly been a headache.
  • The biggest concern for me when I bought my place was the cost of utilities. The house had been empty for a year so I couldn't ask the previous owner what they paid on average. While my gas/electric is under $100/month year round (and some months $30), the water has doubled thanks to the city in 4.5 years.

    Other repairs that I didn't plan for include a new garbage disposal and replacing some rotting wood that meant water was gushing into my kitchen.

    We knew going in that the gutters need to be replaced, that is still on the list. I didn't expect to spend any money in the kitchen aside from painting but the counter top seams are shifting so they'll need to be resealed and I have NO idea what that will cost.

    For me the repairs/upgrades haven't been super expensive because I could plan ahead and budget. If you prepare to put an extra 2 house payments into saving each year then it might cover a good amount. I like to DIY but the major cost I'm running into is tools. Plus, if you're doing things on your own be prepared to pay for some do-overs.

    I'm very lucky to have my Dad living nearby as a jack-of-all-trades and he has many of the tools and expertise I need.

    To date we've done baseboards, installed a ceiling fan, replaced window screens, replaced drywall and mudded, installed new toilets, replaced switches and outlets, replaced the garbage disposal, put up cabinets and shelves in the garage, installed a dishwasher and removed a tree/trimmed branches.

    We still plan to replace a cabinet with a pedestal sink, replace the gutters, replace 6 windows, install another overhead light and replace shelves within a cabinet.

    If I had to buy all the tools for all these projects it would be a much more expensive endeavor.

    Oh, and things we outsourced/paid for: new sod in the backyard, a new retaining wall, brick path way and patios outside, carpet installation and my gas/electric provider replaced my shower head for free :)
  • As supersleeves mentioned, it can be very tempting to immediately start buying furniture in a new place!

    A friend of mine bought a year after I did and got a "refund anticipation loan" since the govt was giving $8k to first time home buyers. She bought a big TV and couch which to me was stupid because if the house fell though they'd have these big ticket items and no way to pay for them.

    I am still using the free couch from my parents, a free footchest, 2 free fridges, free gas dryer, all the storage in my garage was a gift, a loveseat & 3 free chairs, free desk and matching bookshelf from my grandma's estate... etc.
  • I have to agree with lizaanne about buying *well* within your means.

    I define this as:

    1. choosing a place that costs 3x the lowest earner in your household's income (ie, if one of you earns $40k and one earns $60k, buy a home that costs $120k rather than one that costs what many people spend which is combined income x 5 or $500k);

    2. having *at least* 20% down (for a $120k house, that's $24k down);

    3. getting a 15 yr fixed rate mortgage.

    You'll also then want to look at the age of different things in the house: sewer lines, plumbing, wiring, hot water heater, furnace/etc, roof, etc to determine when those expenses may "crop up" and what the replacement of them may be so that you can save up for them -- putting that into your monthly budget of savings. And then, of course, have your 'general wear and tear' added in too such as flooring, etc.

    Then, you'll want to look at the tax situation in the community -- what is the current tax rate, what are those costs? And from there, how quickly have those costs gone up and when? And for what reasons? Then you'll be able to estimate whether or not the taxes will go up beyond your means, but it's unlikely if you have to wage earners who can cover the excess costs -- but it's good to know.

    If there's an HOA, you'll want to look at how they manage their budget, what the fees are, and how much they go up annually (if they go up annually, etc).
  • Everybody above has made excellent points about the surprise costs of ownership. I bought my home three years ago. In the first MONTH of ownership, I spent so much money on little things. Paint, furniture, dishes, soap, etc. All the things you just don't think about when you are budgeting for the mortgage every month, but always seem to pop up.

    Also, every month my first year, something broke. And it was not something little. The air conditioner gave out in the middle of 110 degree days, the garage door wouldn't let the door go down, the garbage disposal started backing up, the water main busted under my house, the back door flooded, the sump pump stopped working. The list goes on and on.

    It was quite eye-opening every time poop hit the fan (figuratively) trying to find someone to come help. I highly recommend having a list of people BEFORE you move in.

    Oh, and have a really good home inspector. They can catch most things before you get too excited, and sign on the dotted line.

    HOWEVER, I am thankful I can do what I want with my house. I don't have to check with anybody to make sure it's okay, that I won't get my deposit back, etc.

  • Thank you so much everyone. This is immensly helpful.
  • Plan for the unexpected repairs- our sewer line out to the street collapsed the first month that we lived in our home. This was not caught by the home inspector because they do not put a camera through the plumbing during a home inspection. Make sure you have enough extra money in savings to cover big/emergency repairs.
  • Here are some thoughts:
    -Be realistic with how much you can change/projects you can take on. When you first move in, there become a long list of things you'll want to do to make your home comfortable. In our house, there were no major renos that needed to be done right away, but we still spend probably at least 2k on... stuff! it's hard to even know what but all of those lowes trips add up. Paint, primer, painting supplies, tools, etc. If you are do-er you'll want to get things the way you want it. Once you get your house painted you can kind of start to see where the cookie crumbles.. which leads me to..
    -furnishings. bigger the house, the more stuff you'll need to fill it. of course there are frugal ways to go about all of this, but you might need a new couch, or a 2nd shower curtain for your 2nd bathroom, etc.

    I also have to agree with other commenters-- buy well within your means, or don't buy at all. Having a place to call home it great, but renting isn't as terrible as some people make it out to be!
  • I've purchased 2 homes. One on my own with only my income and a second with my husband, and I agree with pretty much everything above. Buy well within your means. Anticipate higher utilities and have an emergency fund. Get an inspection, and a home warranty for at least the first year.

    The only thing I really have to add is to go into home ownership with your eyes WIDE OPEN. I know more than one couple who bought a home based on what I call "the charm factor". They liked the look, the historic neighborhood, the previous owners décor decisions, etc. and fell in love with the idea of living there which prevented them from being realistic about the potential down-sides to that property. Usually this is the condition of the house, age of things that will soon need repair, the overall cost or mortgage or utilities, etc.

    They are all paying for this now in various ways. One couple I know ended up giving their kids lead poisoning by remodeling and living in an older home at the same time. Another couple spent so much on a new roof and new air conditioner they could have bought a bigger home initially that better fit their family of five. This same couple LOVED the charm of the giant full grown trees on the property. One tree the inspector said was healthy and fine fell on a clear day for no reason at all. Paying to have that mess cleared up and remove the other large trees near the house was a small fortune. They lost the thing the loved about the yard, a lot of money, and are very fortunate the tree fell into the street and not onto their or their neighbor's home.

    I guess what I'm saying is make sure before you fall in love with something you really think through what living there will be like. Don't brush aside potential issues because you're excited about home ownership. Be patient, the right place for the right price will come along.
  • Completely agree with what everybody has said. By way below your means, because bills and maintenance are usually more costly than expected.

    We bought an antique because we love the charm. I knew it wouldn't be as energy efficient, but we live in New England and our oil bill (heat) averages about $800/mo. in the winter.

    We also wanted a big yard (and that yard does have large trees). I love it, but it's so much work. We still mow ourselves, but have a landscaper pretty much do the rest. That's a few thousand a year.

    I'm a huge fan of renting as cheap as possible until you have a 20%+ downpayment. We lived in a really sketchy part of town for years, but the rent was cheap and we could save a ton. And then we didn't have any kids, so we had less to worry about.
  • I'm sorry if anyone already posted this, I don't have time to read all of the responses ;) but I would definitely recommend a Home Warranty. I had one when I moved in and they have replaced my washer/dryer and water heater in the past year. All for the $60 copay. The warranty can be added to a buyer's offer or the buyer can get it after purchasing this house--for me (a small house) the cost is $50/month--but soooo worth it!

  • I'm smack dab in the middle of purchasing my first home, so I'm not sure I'm the best person to give advice, but I thought I'd share a couple glaring things we've stumbled upon in our hunt.

    Property taxes - the others hit on this but it's so big. Some houses we looked at the taxes were more than the payment! I never considered a house until I knew what taxes were. Also to adjust, we looked at houses below our max amount (monthly payment wise not necessarily by what the bank said) to leave us wiggle room for taxes.

    Insurance - this was much more than I anticipated, but my biggest advice is shop around! I felt bad about "going behind" our current agent's back and getting quotes but it's worth it. I can get insurance from another company for the house we are trying to buy for $1,400 less than my current guy per year. Also ask if they bundle or give any kind of discount. The new agency found us HUNDREDS in discounts.

    Someone mentioned thinking about if you or your spouse loses their job - we sort of did this! My husbands job has peak and off seasons, which can make our income variable, so when we applied for our mortgage we didn't even consider his income. We applied with only my income, which we consider much more stable. This kept us well within our means so that when it is off season we're not stretched to the max because I can pay all the bills "alone." This was advice given to us our during marriage counseling and I think it's brilliant. It's not for everyone, but we base all our expense on just my income level and use his for fun/savings that way if something did happen to one of our jobs (or one of us!) we aren't going to go totally broke.

    Like I said I'm super super new to this, but that's what I've learned so far!
  • Kristy_JoyKristy_Joy Huntington, WV
    My biggest piece of advice is shoot on the low end of your price point. We ended up getting pre-approved for about $30k more than what we ended up buying, and I'm SO glad we shopped around until we found something we liked on the low end, because the mortgage payment is just a small portion of what we end up paying. We ended up getting a base mortgage payment that was about $150 less than what we were paying in rent, but once we factor in PMI, Hazard Insurance, taxes, etc, it ends up being a little more than we were paying in rent. Which is fine for us, because we weren't paying much for rent, so it all ended up ok. But if we had ended up trying to buy a house at the top end of the price range the mortgage company gave us, we would have been totally house poor. My advice is to shop around and find a house that is on the low end of your price range. Be patient!! We saw a lot of houses that we loved, but I'm so glad we waited. I LOVE our new house, and it ended up being super affordable. It had been on the market for some time, and the sellers ended up going down $10k in price which is when we snatched it up, for about $3k under asking (and they payed all closing costs). Turns out we made the best decision because after we started getting into the buying process, we found out we had made a sound purchase -- the inspection went great and it appraised for $15k over what we paid for it!

    My advice: BE PATIENT. The "one" will come, and you'll know!
  • If you buy within your means, you'll have money left over every month to put into the house to slowly update the way you like it. We didn't have 20% to put down on our home, and I have never felt regretful. We do pay our mortgage twice a month, however, (not double, just 1/2 every paycheck), and this will cut down the length of our loan over time. Also, I plan to refinance to a 15 year when we can. But right now, our mortgage is still almost 1/2 what many of my friends pay for nice apartments! That in itself is worth it to me. If you analyze every little detail, you might never make the leap. Things will not be perfect at first, but that's ok! At first we used a lot of hand-me-down furniture from my parents, but now little-by-little we are replacing it with things we like. And don't watch too many home shows. I love HGTV, but I almost cannot stand to watch House Hunters anymore because of the ridiculous expectations. Not having stainless steel appliances should not deter you from buying your first home. You can slowly upgrade over time! We were more concerned with lot size, location, and the BIGGIES like a new roof. Squirrel a little away every month so that when the air conditioning quits in the middle of the summer, you are not panicked trying to figure out how to pay for it. You don't need to have 8 months back-up savings to go for it. I love Suze Orman, but please. You will get there if you work at it a little at a time and are smart with your money and your choices! Have fun!
  • jaclyn923jaclyn923 barrington, ri
    My husband and I were told time and time again to "take your time before rushing into decor decisions and small improvements". I have one word in response to that advice: BOGUS! We have been in our home 7 months now and are almost done with decorating and renovations. Sure, it's felt like we are just hemorrhaging money right now but next year, it will be smooth sailing. So I say if you're feeling the pinch of having just thwapped down all that money to buy the house, just ride it out and get to decorating right now!

    And besides, the longer you wait to repair that squeaky door, the more likely you are to just accept it and "deal with it" in the long term.

    Also, I think too many people rely on the option of a low down payment and just paying PMI. That seems sort of foolish to me. If you don't have enough savings for a sizable down payment (20%) then realistically, you shouldn't be owning a home.
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