Becoming a homeowner can be an exciting time in one’s life, but it comes with a host of expenses that should not be overlooked. While it’s tempting to look only at the price tag, including the down payment and monthly mortgage payments, there are several other costs associated with owning a home that should be taken into account. If you are a skilled trades worker looking to buy a house, it’s essential to have a clear understanding of the true costs of homeownership before making a purchase, and this blog post will break down all the hidden and not-so-hidden costs so that you can be equipped to make an informed decision.
down payment
For most homebuyers, the down payment is the largest expense associated with purchasing a home. The amount that you put down will depend on the type of mortgage and the lender’s requirements, but most conventional loans require a down payment of at least 20% of the purchase price. If you’re purchasing a $300,000 home, your down payment will be $60,000. According to a recent survey, the average down payment for first-time homebuyers is around 6%, which means on a $300,000 home, you’d need to put down $18,000. However, keep in mind that if you put down less than 20%, you may have to pay for private mortgage insurance, which can cost you between 0.3% to 1.5% of the loan amount annually.
closing costs
Closing costs refer to the fees you pay during the settlement of the purchase of the property. These fees can include appraisal and inspection fees, title and insurance fees, attorney fees, and discount points, among other things. According to the mortgage data firm ClosingCorp, the average closing cost for a home purchase in the US was $3,339 in 2020. However, depending on your state, these costs can be much higher. For example, in New York state, the average closing cost was $6,385, while in Pennsylvania, it was $1,837.
homeowners insurance
Homeowners insurance is an essential expense that provides coverage in the event of damage to your home, theft or loss of property, and liabilities associated with owning a home. According to the National Association of Insurance Commissioners (NAIC), the average cost of homeowners insurance in the US was $1,211 in 2017. However, the cost of insurance premiums can vary depending on your state, the type and age of the home, and the coverage amount. For example, states like Florida and Louisiana, which are prone to natural disasters, will have higher insurance premiums than states that are less prone to those events.
property taxes
The property tax is an ongoing expense that is paid annually by homeowners. Property tax fees go towards funding various local government services, such as schools, road maintenance, public safety, and parks, among others. The amount of property tax you pay is based on your home’s assessed value, and the rates vary depending on your state and local government. According to the National Association of Homebuilders, the average annual property tax in the US is $3,296.
Maintenance and Repairs
Homes require regular maintenance and repairs to keep them in good condition. These expenses can be ongoing and unpredictable, but it’s important to plan for them. Common maintenance and repair expenses include lawn care, pest control, HVAC maintenance, plumbing and electrical repairs, and roofing repairs, among others. According to a 2018 report by HomeAdvisor, homeowners in the US spend an average of $8,305 per year on home maintenance and repairs.
Utilities
Another ongoing expense that’s associated with owning a home is utility bills. These include electricity, water, gas, phone, and internet bills, among other things. The cost of utilities will depend on the size of your home, your location, and your living habits. According to a 2020 survey by Move.org, the average monthly cost of utilities in the US was $424.76. However, keep in mind that this will likely be higher if you live in a larger home or live in a region with higher utility rates.
Homeowners Association Fees
If you’re purchasing a home in a managed community, you may be required to pay Homeowners Association (HOA) fees. These fees go towards maintaining the common areas in the community, such as the pool, landscaping, and security systems, among others. According to the Community Associations Institute, the average HOA fee in the US is $331 per month or $3,972 per year.
Bottom Line
In conclusion, owning a home is a significant investment that requires planning, budgeting, and ongoing maintenance. It’s vital to have a clear understanding of all the expenses associated with homeownership, from the down payment to insurance premiums, property taxes, maintenance and repairs, utilities, and HOA fees. As a skilled trades worker, it’s crucial to consider these costs when calculating how much home you can afford. By having a realistic budget and a clear understanding of the expenses, you can make an informed decision on the right home for you and your family.
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> Inaccuracies with Bureau of Labor Statistics (BLS) data: Many of our blog posts will quote BLS data. SkilledTradeRescue.com has been able to identify that data quoted specifically for Skilled Trades can be as much as 50% LOW in many USA labor markets. For more information on these inaccuracies please visit the STR national labor survey page at the link below. On this page there is a video containing the latest information at the top of the page as well as other information. If you currently work in skilled trades, PLEASE consider participating in our national labor survey.
