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Buying a new home is an exciting endeavor; it’s likely one of the biggest purchases you’ll ever make. You’re likely wondering, amidst all of the excitement, how the heck you’re going to pay for it every month and how much it will truly cost. Establishing a monthly budget for a new home before you’re even living there can be a tricky task, particularly if this is your first experience owning a new home. But it’s also a crucially important exercise in order to make sure that you’re allocating funds properly so that you have the finances to cover bills and to be prepared for any potential unforeseen homeownership expenses that might pop up. Researching and preparing for your future financial obligations will help you stay on track month-to-month. Below is an outline of common monthly homeownership expenses you can expect to pay.
1. Your mortgage. This is likely the most obvious. Your loan officer can give you a very detailed and accurate estimate of what your monthly mortgage costs will be. Most traditional loans are over a thirty-year period so the biggest variables in this equation are how much money you’re borrowing and how big of a down payment you put down. You will often hear your mortgage payment referred to as “PITI.” That stands for Principle, Interest, Taxes and Insurance. The principle is what you are paying back on the actual loan every month that will reduce your balance. Interest is how the bank makes their money for lending to you. Insurance typically includes both mortgage insurance (if you put less than 20% down) and property insurance. Taxes refer to your property taxes that are typically set by a countywide rate. Your lender will likely maintain an escrow account that handles the payment of your taxes and insurance. They divide the amounts over a twelve-month period that you pay with your monthly mortgage payment and then they pay the quarterly or annual bills.
2. Utility bills. You can either ask your Sales Counselors if they have monthly estimates or call the utility providers & get estimates for services such as the following:
Most new construction homes are designed to be energy efficient, a feature that will help you save money on a monthly basis.
3. Routine Maintenance & Upkeep. Your home will require a little bit of TLC to keep it functioning at it’s best. Some common items that need regular attention are:
Smoke & Carbon dioxide detectors
The good news with new construction is that should something go majorly wrong with your plumbing or electrical, for instance, during the first years of homeownership, there’s a strong chance that it will be covered under your homeowner’s warranty.
4. Homeowner’s association fees. Most new construction communities have annual home owner’s association fees. These funds are used for the upkeep of common areas and amenities such as the entrance to the neighborhood and a pool if your community has one. Your Sales Counselor will be able to fill you in on how much it is in your new community.
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