Costs of Home Ownership
Hi Everyone: Today’s topic focuses on the costs of home ownership in San Diego.
So let’s paint a scenario about these costs of home ownership in San Diego. You’ve finally picked out your dream neighborhood in San Diego, narrowed down a few mortgage lenders, and even reached out to a reputable real estate agent. The major question remains, how much money should you actually have set aside to not only acquire the house but realistically maintain the home with all of the costs that go along with home ownership?
My name is Brian at Trusted House Buyers and thanks for tuning into this video today.
Ok, let’s start with the first order of business, the dreaded down payment. As we all know, the down payment is a percentage of the home price you pay at the closing of a home sale. Down payments can range anywhere from 3% all the way to a whopping 20%, depending on your loan type and the home’s sale price. Are you in a solid financial position to make this type of commitment? I do have to note that there are some programs for military personnel which I’m excluding in these examples.
Now let’s jump to the closing costs. Closing costs are the additional fees and charges for buying a home and closing on a mortgage, and many buyers do not realistically factor in these charges which can make for a big surprise during escrow. These costs typically account for 3% to 6% of the home purchase price, depending on the specifics of your home sale. Closing costs usually include fees for things like applications, attorneys, credit reports, property appraisal, and more. If that seems like a long list, don’t hold your breath, the list continues. Closing costs may also include homeowner’s insurance, private mortgage insurance, and a possible escrow deposit to cover the first few months of property insurance and mortgage payments. It is very important to make sure you have calculated all of these costs into your home purchasing budget because they can definitely add up!
So congratulations! You have purchased your dream home. Now you must factor in moving costs. The average cost to hire movers can range anywhere from $700 to $10,000 if you are moving across the country! You can save money by moving yourself with a local truck rental, but we all know what a frustrating and daunting process moving can be. We have all been there!
And now we move onto mortgage payments. So, your monthly mortgage payment is set by your lender, and it really can vary widely based on the home’s purchase price, mortgage rate, loan type, and mortgage term.
Here’s how mortgage payments typically break down:
- Principal: this is the money that goes directly to the balance of your loan.
- Interest: this is the money toward the interest amount your bank charges for the loan.
- Taxes: Property taxes are held in escrow and then collected by your local government.
- Homeowner’s insurance: This is the insurance that protects your home against damage. This is a must.
- Mortgage insurance: This is insurance that protects the bank if you cannot pay your loan.
As though this list doesn’t seem long enough, I wanted to put a particular emphasis on property taxes and insurance that can be costly, especially here in sunny San Diego. Each state sets a real estate tax rate, and the assessment of your home and property will determine the final amount. When it comes to insurance, the location, size, and condition of your home will play a large factor into the price.
So you’ve made it through the stressful purchase process and are now in the home. Is it smooth sailing from this point on? Not always. First off, you will need to budget for the many utilities that go into a well working home. Some of those utilities include water, electricity, gas, and the internet to name a few. This is often underestimated when ‘upgrading’ to a bigger home.
Second, one of the biggest costs of homeownership after purchasing your home are the many repairs that come along with it. Many homeowners have no idea how much they need to budget for home repairs.
Let’s talk about a 1% rule. If you’re using the 1% rule of thumb, you should budget at least 1% of the home’s purchase price for maintenance expenses. Here’s an example – if you purchased a $250,000 home, you could budget a minimum of $2,500 for upkeep and repairs using this rule. But is that really enough? Doesn’t seem like it.
An alternative to the 1% rule is the square-footage rule, which dictates putting away $1 per square foot of your home for annual repairs. Which one you choose should depend on the age and condition of your house.
As you can see, there are many options to sift through when it comes to preparing for homeownership in San Diego. It is a decision that a potential homeowner should not take lightly. Do some research so you can understand ALL of the costs associated with homeownership and so you can make an informed decision. If you are a homeowner and the rising costs of homeownership are simply too much for you, Trusted House Buyers can offer you a cash offer, take your home as-is and close on your terms. For more information on the rising costs of homeownership in San Diego (and there are many), you can always call us at Trusted House Buyers by dialing, 619-786-0973.