Janis Peterson, GRI, ABR, CSP Realtor®
Philadelphia Main Line Homes and Real Estate
Montgomery, Delaware, and Chester Counties
According to the Federal Housing Administration (FHA), depending on the current debt ratio, most people can typically afford to pay 29 percent of their gross monthly income for mortgage payments. For example, if you earn $50,000 annually, then your monthly income is $4,167. Twenty-nine percent of that is $1,208.Although this provides you a starting point for budgeting for homeownership, don't forget the other housing expenses you'll incur when determining if you can afford the house you want to buy. The most obvious of additional housing expenses are utilities—gas, electricity and water. But don't forget about telephone, trash collection, and cable or satellite bills. Taxes As a property owner, you are responsible for property taxes. The rate will vary from city-to-city. In our community, the tax rate is (insert %) percent. That means for a home with a market value of $150,000, yearly taxes will run (insert dollar amount). To get a general idea on how much the tax bill will be for a property, ask the seller for a copy of the previous year's tax assessment. Your real estate professional can help you refine these figures. Maintenance With homeownership comes upkeep. You'll want to set aside a small amount each month to pay for those "rainy day" repairs such as painting, plumbing, and carpet cleaning. The amount you budget will depend on the age of the home, as older homes tend to require more repairs because the appliances are older and may not be under warranty. Don't forget about seasonal maintenance, including lawn care, window cleaning, pest inspections, and gutter cleaning. And if you live in a home long enough, there are inevitable repairs—the roof, furnace, and appliance replacement. Insurance To protect yourself financially, in case something happens to your property or its contents, you'll need homeowners insurance. Depending on the type of coverage and your area, the costs for homeowners insurance each year can be anywhere from a few hundred dollars to thousands of dollars. And, if you live in an area that has high risks for flooding, earthquakes, hurricanes, etc., you may need supplemental insurance. In addition, if you want broader or higher coverage for your collections or high-ticket items such as computers, jewelry, and artwork, you may want to purchase an endorsement/rider to your homeowners policy. Remodeling/Upgrades Whether you buy an older home or have one newly-built, there are going to be improvements you want to make. So, you need to consider remodeling and upgrading costs as well when determining your housing budget. Consider: the average cost to remodel a 25+ year-old bathroom in 2004 was $9,861, according to Remodeling Magazine's annual Cost vs. Value Report. This includes materials, labor and subcontracting fees. Even the cost for paint, light fixtures, window treatments, flooring and decorative cabinet knobs can begin to add up. However, having a home improvement fund will help lighten the load. By determining all the costs associated with homeownership, you can go into your home search with a reasonable price range that will allow you stay within your budget.
"Real Service in Real Estate." For a personal consultation on buying or selling real estate, Janis Peterson, GRI, ABR, CSP Realtor® can be reached at (610) 642-3744, e-mail: email@example.com. Prudential Fox & Roach Realtors® is an independently owned and operated member of The Prudential Real Estate Affiliates, Inc.
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