Coming Up Short

Morgen Henderson

I’VE BEEN LIVING with roommates since I graduated college two years ago. I decided it was time to buy my own place. I saved diligently and I figured I had enough for a down payment.

I also figured I could handle the monthly mortgage payment, which wouldn’t be much more than I was paying in rent. I was looking for a townhouse or condo, which might cost $250,000 to $300,000 where I live.

What I didn’t grasp, however, were all the other costs I needed to think about. When I added them up, I realized I simply couldn’t afford the sort of house I wanted. Here are all the expenses I learned about—and which made me delay my home purchase, while I saved up more money:

Closing costs. These include things like home inspection, title insurance and mortgage application costs—all the money you have to pay before the house is even yours. Closing costs often run 2% to 5% of a home’s purchase price.

Property taxes. These are generally calculated as a percentage of your home’s value. Property taxes would have added another $180 to $250 to my monthly costs.

Homeowner’s insurance. This isn’t just a good idea to protect a hugely valuable asset. Your mortgage lender will also insist you have coverage. For the sort of home I was looking at, homeowner’s insurance might cost $800 a year.

HOA fees. Townhouses and condos typically have homeowners’ association (HOA) fees to cover the community’s clubhouse, pool, yard service and so on. In my area, they generally run $100 to $700 per month. While condos and townhouses are usually cheaper than single-family homes, I didn’t appreciate that ongoing monthly costs can often be higher.

Utilities. Today, I split the utilities with my roommates. Those utilities come to around $75 per person per month. What if I bought a place? I’d have to shoulder the full burden, paying perhaps three to five times what I’m currently paying. Also, when you’re renting, the landlord sometimes covers some of the utility bills and provides services, such as wi-fi and cable.

Wear and tear. If you rent, the landlord pays for the regular maintenance and takes care of unforeseen problems like mold or water damage. While the cost varies from year to year, average annual maintenance costs might be 1% or more of a home’s value. On top of that, after you close on a house, there are often problems that weren’t spotted when the home was inspected. You could be stuck paying thousands of dollars to fix problems you didn’t know about.

Furniture and appliances. Today, I don’t have a lot of furniture and I don’t own any appliances. I knew I’d need to purchase things like couches, chairs, tables, a washing machine and everything else needed to make a home comfortable. But I didn’t realize just how expensive these things can be. After some research, I figured I might need at least $5,000 to furnish my new home—another reason I decided to delay buying a house.

Morgen Henderson is a writer from the beautiful mountains of Utah. Her previous articles were Saved by Borrowing and Last Questions. She covers a variety of topics, ranging from travel and lifestyle to tech and personal finance. When she’s not typing away at her computer, you can find her baking desserts and watching an excessive number of travel shows. Follow Morgen on Twitter @Mo_Hendi.

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R Quinn
R Quinn
2 years ago

Hey Morgen, don’t take this the wrong way, but geez, you really didn’t grasp all that goes with home ownership? I think your estimate of the cost of furnishing a place is a tad low too. Check out the price of a decent fridge these days. Wear and tear can really get you. Two weeks after we moved into our last house many years ago the boiler burst and flooded the basement. Two months before we sold that house last year a large tree next to the house died; $4,000 to remove it. Then the AC went; $1,500 to fix. You seem to get a break on taxes though. Come to NJ. The property taxes on my condo are $1,100 a month. Good luck with your quest. You’ll get there😎

2 years ago

This is why I’m happy to rent for now. Homeownership makes a lot of sense if you know you’re going to stay in an area for a while, but I haven’t reached that stage in life just yet.

2 years ago

The cost of home ownership can vary greatly depending on your area, obviously. Here in the Midwest, $800/yr for insurance on a $300k property is too low by about a factor of 2. However, HOA fees generally aren’t that steep, with $3-400 being on the high end around here, for the most part. As for taxes, $2-300/month for a $300k property sounds about right for this area, for the most part.
And a few other things to consider…
If you are comfortable with roommates now, why not consider them with home ownership? OTOH, if you are sick of roommates that’s probably not a feasible strategy going forward. And, you are right not to put yourself in a position of depending on roommate income to make ownership possible. That can be a dangerous and foolish gamble as I’m sure you’ve already figured out.
As for utilities and wear and tear, consider a newer build; they are generally much more utility-friendly, and should have far less maintenance and upkeep issues as well. In some areas, you are likely to pay a bit of a premium for a newer build, but this can be a good investment especially for those who aren’t in a position to do some of their own work/improvements. And it can really pay off month after month with lower utility bills. This is where patience can be your best friend; with the ups-and-downs of the real estate market, sometimes you can get a great deal on a newer build and not be paying that much of a premium for it. That’s (another)one of the great things about home ownership–if you do it right, treat it as an investment, and stay flexible as to your wants and needs, you can sometimes get a great deal AND a great place to live. This is a big win, in my book, and not to be under-estimated. It can really add to the quality of your life, as well as the quality of your investment portfolio at the same time. Patience definitely pays.

2 years ago

My HOA fees are $400/month. For that I get landscaping, exterior repairs (roof, siding, chimney. fence) insurance for the exterior, garbage, sewer and water (a big expense) and the community center and pool. I think it’s a very good deal for Portland OR.

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