Have You Considered the Full Cost of a Home?
November 14th, 2018
November 14th, 2018
When thinking about the cost of purchasing a house, most people think primarily about the price of a mortgage. This can be broken down into the parts of a mortgage payment.
If you are asking, “What are the four parts of the mortgage payment?”, take a look at this post, which breaks it down:
These are often summed up with the acronym, “PITI.” We also added in a fifth financial consideration:
If you are considering these five components, you are already taking a more comprehensive look at the cost of buying a home than many other home purchasers.
This is still not a complete picture however. There are other one-time and continuing costs of homeownership to consider. Let's go over some of those now.
At the time that you buy your new home, you will need to be prepared for the following additional costs:
Along with these expenses, do not forget that taking time off and transporting your possessions from your current home to your new residence will result in another financial hit.
You will also need to look at your savings make sure that you have enough to cover six months of mortgage payments if necessary. This is called “cash in reserve.” While this is not money you have to spend, it is something which lenders will look for before deciding to approve you for a mortgage. If you cannot prove you have access to these funds, they may decide you cannot afford to buy a home.
If you can afford all these upfront costs, that is a good sign that it might be time financially to buy a home. But you also need to be thinking about the future and the long-term costs you can expect to pay going forward.
Here is what you need to consider over the long term. First, there are the aforementioned “parts of a mortgage payment":
Along with these, you can expect the following ongoing costs:
Remember that these costs can vary quite a bit as time and circumstances change, so that is something to make sure you are prepared for.
You now have a better understanding of not just the parts of a mortgage, but also the other costs which may be associated both with the home purchase process and long-term home ownership. If you still need help figuring out how much home you can afford, please give us a call at 317.255.0062. We can go over your finances with you and help you plan.
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