Don't Get Derailed By These Surprises
Author: Lisa Novak
Tired of paying rent and looking to purchase your first home? Perhaps you have done your homework and know the amount of money you will need to save for a down payment and closing costs. You may even know how much your escrow for taxes and insurance will be. If so, congratulations! You are headed in the right direction. However, here are a few financial surprises that could derail your home ownership success.
Home Owners Associations
You found the home of your dreams and your realtor casually mentions that it is part of a homeowners association - you know, one of those groups that you pay into that keeps up the community in which you live. You shrug it off, after all this is the home of your dreams - but really, you need to know more.
Though paying dues to your homeowners association may provide upkeep and pay for certain improvements in your neighborhood or perhaps your home, you should be aware of a few things.
First, know how financially sound your association is. Ask to see the budget or past financial statements. This will be a good indicator to you about possible upcoming increases in your dues. You may be able to afford those monthly dues now, but can your budget stand an increase?
You should also understand what is covered and what is not by your home owners association. Do they take care of your condo’s roof, but not the windows? Does it pay for lawn service or snow removal, or are these additional expenses you will have? Be sure to check out a copy of the bylaws before signing that purchase agreement so you know exactly what’s covered.
Finally, know what you are allowed to do and not do. Some home owners associations set forth rules about improvements that can be made all the way to the types of pets you can own. Financially, some of these rules can be a burden. For example, if you thought that you would replace windows with the cheapest you could find, you may be surprised to find out your home owners association requires a certain model to match the rest of the condos or homes in the area. That could mean more dollars out of your pocket - and that’s something you don’t want to shrug off. Read those bylaws.
So you found that great classic house that was owned by a senior citizen for many years. It’s clean, has potential for updating, in a great neighborhood, and the property taxes are nice and low. Or so you thought.
If this sounds like the house you are buying, take note. Many times, seniors are offered a property tax freeze to help them stay in their homes with their fixed incomes. However, when someone else becomes the owner, those taxes can go up to the full assessment. If that happens, your escrow payments could jump causing issues with affordability.
Be sure to ask your lender, realtor and attorney about your taxes. You can also check on them through county records. Don’t get stuck with a surprise tax hike that makes your dream home payments a nightmare.
Furniture and Window Treatments
A cost that is rarely ever figured when buying a home is the cost of furniture and window treatments - and both are quite costly.
Curtains and shades are important to have to protect furniture, offer privacy, and for climate control. First time home buyers are often surprised at how much even the simplest of treatments can cost. If there are already window treatments on the window when you are looking at the house, consider negotiating them into the purchase agreement. You’ll have something to start with, and can stagger the replacement instead of breaking the bank to buy them all at once.
Buying furniture for your home is exciting and the furniture stores offer attractive financing - or so it seems. An offer of interest free payments for a specified period can save you money, but only if you truly understand the rules of the agreement and pay the full bill off by the end of that specified period.
Two scenarios will most likely throw this “good financing deal” off track: You don’t have the discipline to make those payments or get caught with another unplanned expense and pay that instead. Unfortunately, in many cases, the interest can accrue during the initial “no interest time period” and can be added on at the end. That along with high store card interest rates can make for very high payments down the road.
Handling Other Hidden Expenses
Yes, there are other expenses that may surprise you along the way. In the long run, the best things you can do to avoid as many unexpected expenses is to do your research and have a savings account set aside for the ones that catch you off guard. If you do that, the joys of home ownership will often outweigh the burdens of unexpected expenses.