Many young families cannot save enough to qualify for purchasing a house. Even if a family has enough in funds to make a 20% down payment so they will not have to purchase mortgage insurance, the closing costs are so high that it is another barrier to purchasing a home. Consequently they rent a house, a condo , an apartment , or possibly a room. Renting is not all bad if the rates are not too high.
Things people have to consider in purchasing a home are the property taxes, the interest on the loan, the homeowners insurance, and the deposits for the utility companies. Included in the closing cost may be “points” which is a method to adjust the interest rate to the current interest rate a mortgage company is willing give to the borrower. Points can increase the closing costs significantly. The cost of the property taxes is allocated over a twelve month period for the upcoming year. If the person purchases the house in the middle of the tax year the taxes paid for the portion of the tax year remaining are charged to the borrower. The property taxes for the current year will be allocated over a twelve month period and put in escrow so they can be paid either annually or semi- annually The first three months premium on the homeowners policy is normally included in the closing costs, then an amount equivalent to a one month rate is charged monthly from that point on and the money goes into the escrow fund to pay the insurance on an annual basis. There are title company fees for the title search and for the filing for the new owner. If there is an HOA (Homeowners Association) at least three months fees are collected at the closing. Just as an example , we purchased a home in Arizona for winter time living for $90,000. We paid 20% down or $18,000, then the title company allocates the closing costs. The seller paid 3% or $2,700 of the closing costs , even with that the items I have described above come to over $3,600 for our share of the closing costs.
We were aware after we took possession that there were things that needed to be done to our newly acquired property. We paid a plumber $600 to replace shower and tub plumbing , replace the washer faucets, and run a pipe to the front of the place for outside water. We paid an electrician $100 to repair a non working outlet, install a new ceiling fan, and two outside porch lights. We got the lights and ceiling fan at Home Depot for $200. Since this house is much larger than our previous living quarters , it is 1,700 sq ft, we needed more furniture. We bought a used bed and mattress, a used couch and love seat, a used TV Fireplace stand, a Maytag front load washer and dryer (4 yrs old). an oak dining room table and six chairs. All of those items came to about $1,000.
We found after moving n that the roof had some problems that were not disclosed in the inspection report we paid $380 for. He said the roof had a few more years in it and had a few loose shingles and several missing from the garage. The problem was much more extensive than that. There were whole sections that are not tacked down. A heavy windstorm came through two years ago, according to the neighbors, that blew the roofs off of many of the homes in the 58 home subdivision we live in. The neighbors said just about everyone got a good settlement on the roofs, but the people that lived in our house got the money from the insurance company and did not use it for the roof. A roof costs approximately $5,000 for our place. Also we needed a larger TV for our TV fireplace stand , we have a 40 inch TV. My wife wanted to get a 60 inch TV. I found that 55 inch TV’s are a lot cheaper than a 60 inch TV , so we are getting a 55 inch Toshiba TV. We looked at Walmart’s brand and Element brand that are cheaper, but the sound is not good on them, so for $50 more I got a Toshiba.
Hopefully after making the above repairs and improvements , the cash flow will slow down and we can live within a regular monthly budget.
As you can see it is not always wise to buy a home unless you plan on it costing significantly more than rent in the early years of ownership particularly if it is an older house , or a new house that needs landscaping and other items.
This Month’s Income Opportunity
Spring is here and a lot of people are beginning their extended vacations that may occur now, through the summer, and into the fall. Many need house sitters and or pet sitters. Click on this link to see how this might be an opportunity for you to live economically or to hire someone to meet your house sitting or pet sitting needs.
Click on this link Click Here!