A few years removed from the recession, many Americans feel like the economy is out the woods and one area that continues to do well is the housing market. Low mortgage rates and rising home prices have made buying a home a more attractive option than renting for millions. As these buyers move from being renters, there are many new responsibilities that come along with owning a home. Here are some financial obligations first-time homebuyers need to consider before making a major purchase:
Mortgage payments and closing costs
Most Americans need to purchase a home with the help of a mortgage. Now is a particularly good time to buy, as mortgage rates are below where they were a year ago and remain near historic lows. You can easily see how much you can afford in a mortgage by getting preapproved for a loan and checking with requirements of different lenders. In many cases, your monthly mortgage payments can be lower than rent prices. It is essential that you have a steady source of income to continue meeting these payments for years down the road, or you could risk falling behind on your mortgage. Additionally, you need to consider all the closing costs associated with buying a home and finalizing a mortgage, such as appraisal fees, attorneys fees and title searches. These expenses can be thousands of dollars, so you need to budget them in.
A home is one of the biggest purchases a person will make in their life, which is why it is essential to protect it with homeowners insurance. There are many factors that will affect how much you pay for a policy, but it is well worth it to have coverage for damage and theft. Otherwise, you could be in a financially vulnerable position.
When you're a renter, you don't need to pay taxes on the property where you live, but your landlord does. Once you take on the responsibility of being your own landlord with your own home, you need to cover these costs. Before you purchase a home, make sure you take a look at the annual property taxes to ensure that you can afford them every year.
Every homeowner should start saving money for an emergency. Whether it's unexpected repairs or something that doesn't have to do with your home, expenses can appear suddenly and without warning. To protect yourself and your finances, having a little bit set aside in a rainy day fund can make you more secure in your new home.