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First Time Home Buyer? Here's some stuff to think about...

Updated Wednesday, January 6, 2010  ::  Views (1041)

     Before you start searching for your dream home, you first need to determine a price range you can afford. Depending on the consumer’s current debt ratio, most people can typically afford to pay 31 percent of their gross monthly income for mortgage payments. For example, if you earn $50,000 annually, then your monthly income is about $4,167. Thirty-one percent of that is $1,292.

     There are several online tools to calculate a monthly mortgage you can afford using factors such as your current monthly expenses, down payment and the interest rate. You can also work with a lender to get pre-qualified for a loan. This estimate will help you gauge how much money you may be able to borrow and the monthly mortgage payments.

     However, the amount you are able to afford for a home loan should not be your only consideration for determining your price range. With homeownership come other housing expenses.

Utilities
The most obvious of additional housing expenses are utilities—gas, electricity and water. But don't forget about telephone, internet, and cable or satellite bills.  You also don't want to forget that for all utilities there is a 'set up' fee which varies depending on the company. These fees can add up to a few hundred dollars.

Taxes
As a property owner, you are responsible for property taxes. The rate will vary from city to city. To get a general idea on how much the tax bill will be for a property, ask your Realtor what the previous year's tax assessment was for the property.

Condo Fees
Another cost you may incur is Condominium fees. Most condominiums have condo fees, which are legal entities, created to maintain common areas and enforce deed restrictions. As a property owner, you are required to pay the established monthly or annual dues. Be sure you factor this cost into your budget.

Maintenance
You also need to consider the upkeep of your home. You should budget for seasonal maintenance such as lawn care, pest inspections and carpet cleaning, as well as unexpected repairs. The amount you budget will depend on the age of the home, as older homes tend to require more repairs such as installing a new roof, painting and replacing older appliances.

Insurance
Depending on the type of coverage and your area, the costs for homeowners insurance each year can be anywhere from a few hundred to thousands of dollars. If you’re purchasing an older house with knob and tube or aluminum wiring they may ask you to remove all the wiring, or in the case of aluminum wiring have it ‘pig tailed’. This may cost you a few thousand dollars once you take possession and you may have to do it within a short time, such as 30 days after closing.

Remodeling/Upgrades
Unless the home you purchase is picture perfect, you’ll more than likely be adding your personal touch. Therefore, you need add to your housing budget the costs for remodeling and upgrades. Even minor cosmetic fix-ups such as light fixtures, window treatments, carpeting and decorative cabinet knobs can begin to add up.

By determining all the costs associated with homeownership, you can go into your home search with a reasonable price range that will allow you stay within your budget.

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