Some people love surprises. But for first-time home buyers, you may find yourself wary of unexpected and unpleasant costs that come with acquiring and owning your home.
For the uninitiated, the cost of a home include the principal and interest — based on the property’s list price. Unfortunately, first-time home buyers eventually find out the hard way — home ownership includes more than their mortgage payment.
Other items should be contemplated — often considered hidden cost — such as, HOA fees (monthly and quarterly), property taxes, insurance, maintenance, and even the utilities. In fact, some have homeowners must pay two or more HOA dues. We’ve seen communities that must pay a monthly due for HOA ABC and a quarterly due for the second HOA — think of it as HOA XYZ — for the same property,
Hidden Cost Of Homeownership In Figures
According to a recent report from the real estate site Zillow, these additional expenses could set back U.S. homeowners, on average, $9,080 per year.
These hidden costs can be broken down into two categories:
Homeowners in the country shell out an average $6,059 a year for these unavoidable costs, and an additional $3,021 for the maintenance and other home improvement projects.
With the help of Thumbtack, a local services marketplace — connecting customers and local professionals — the report cited the most common maintenance and home improvement projects homeowners usually cite when requesting a service. These requests include carpet cleaning, yard work, gutter cleaning, HVAC maintenance, house cleaning and pressure washing.
How Denver Compares To Other Large Metro Areas
In Denver, home buyers should expect to pay $6,134 for these unavoidable costs and $2,318 for maintenance expenses, totaling $8,451 in hidden home ownership costs in the area. This ranks no. 21 among the 30 metro areas considered in the Zillow research.
Among these metro areas in the U.S., it isn’t surprising that, homeowners in San Francisco are burdened with the highest unavoidable costs ($13,019 on average), due in large part to the market’s high home values and property taxes. Meanwhile, those from Indianapolis, pay the smallest price: $4,699.
On the one hand, Seattle homeowners are saddled with the highest maintenance expense, paying on average $4,052 per year; while San Antonio homeowners have the least expense: $1,962.
The top 10 metro areas with the highest total hidden cost shake out as the following:
What First-time Homebuyers Should Keep In Mind
Zillow data show nearly half, 47 percent, of home buyers nowadays are first-time home buyers, and around 40 percent of these first-time buyers, pay more than they budgeted when buying their first propery.
According to Svenja Gudell, chief economist for Zillow, finding out the total cost of home ownership every year is really one of the most challenging aspects of home buying, especially for first-time buyers.
“Before starting a home search, take a good look at your finances to determine a monthly payment range you can comfortably afford,” Gudell said. “While that big back yard or larger home may be appealing, it is important to consider how much maintaining those spaces could cost you.”
These hidden costs should not put them off from purchasing their own place, because buying a home may prove less expensive than renting in high-rent markets with relatively lower home values. The most important thing is to maintain a complete total cost of home ownership awareness when considering a home purchase.
Financial adviser Jenna Rogers with Mission Wealth Management, shares advice for the first-time home buyer: account for these hidden costs.
“Open a new savings account, and designate it as the ‘home account,'” she said. “Send the necessary amount to this home account every month. That way, when you have to pay property taxes, for example, you’ve already had the cash build up.”
Fortunately for homeowners, most lenders require them to pay property taxes every month with their mortgage payment — in a single payment. This step helps ensure the homeowner is capable of paying their property taxes on-time every year. Additionally, it is likely the homeowner is required to, per the loan agreement, actively maintain and pay the minimum insurance costs with their single, monthly mortgage payment, too.
These considerations are an important step for any homeowner, particularly the first-time home buyer. Keep these in mind when you begin looking for your first (or next) home.