April 17, 2018

Beyond Your Mortgage: Know What You Can Afford

Buying a home is likely the largest purchase you'll ever make — and it's one that will probably take a while to pay off. We've discussed the importance of understanding your finances before buying, but it's just as important that you understand your financial obligations once you become a homeowner.

In addition to your mortgage, here are additional expenses to consider when planning for your financial future:

Homeowners Association Fees. If you're among the 20% of America's homeowners that live within a community governed by a Homeowners Association (HOA), it's important that you pay your fees as scheduled – typically monthly, quarterly, or annually. HOA fees typically cover services such as trash removal, lawn care and maintenance for common areas, pest control. It's also important to keep in mind that these fees can increase each year with the cost of services.

Home Maintenance. As a homeowner, you'll need to save money for home maintenance. Similar to owning a car, your home will need regular upkeep to ensure it remains safe and in great shape.  To help you plan for home maintenance costs:

  • Plan ahead for major purchases and home improvements. If you know your roof, for example, will need replacement in a few years, be sure to make this part of your savings plan now.
  • Take periodic inventory of your home's appliances, roof, decks, etc. Take note of when warranties end, the age of certain features, and when manufacturers recommend replacement.
  • Make sure your homeowners insurance is active and current. By maintaining an adequate amount of insurance (generally the cost to rebuild your home if damaged or destroyed) you'll have the protection you need for serious damage or a disaster.

Remodeling Expenses. If you're thinking about remodeling, be sure to ask yourself how long you plan to be in the home and if it's an investment in your lifestyle. Remodeling can be expensive and it's not always a sure bet that you will recoup your investment when you sell your home.

The Unexpected. In addition to preparing for planned expenses, it's important to build a savings plan for life's unexpected emergencies such as, illness, unemployment or those necessary home repairs you didn't plan for. It's recommended that you set aside between three to six months of living expenses for unexpected emergencies.

Visit My Home by Freddie Mac® to learn all you need to know about the homebuying process and be sure to follow our Spring Homebuying blog series.