One of my biggest pet peeves about humans and money is that our anchors are all different. What is expensive to you may not be expensive to me and vice versa. I’ve run into this issue a million times as I enter the world of home ownership.
So many people have said to me “Home ownership is expensive.” What the heck does that even mean? I’m going to try shine a little light on the cost of home ownership.
I walked into home ownership with a vague idea of how much things cost. I’m hoping by sharing my numbers I can give others a little more insight on what they are getting into when they buy a house.
Aggressive Disclaimer: These are my numbers, true to my house. Obviously, your numbers will differ. But hopefully this can be a plot on the graph of what a homeowner can expect.
How much does it cost to buy a house?
The big goal is 20%. That’s what I was originally shooting for. I wanted to avoid PMI like the plague so I knew I needed to get to a 20% down payment.
But what is 20%? We didn’t know how much house we were going to buy. Our goal was to find something between $200k and $250k. That put our down payment goal between $40k and $50k.
Lesson 1: Save high!
We didn’t know where in that range we were going to fall. The natural inclination is to spend $250k, so we waited until we had $50k to put down before we actively searched for a house. Things sell fast here, so we wanted to be ready when we were ready. Thankfully, we fought the urge to spend $250k and we ended up spending $215k, which took $43k for a down payment.
Having $7k+ to spend on life, moving and the house was a huge blessing. We were able to paint and update all the flooring before we moved in. We also had the financial flexibility to have a 2 month overlap of our apartment and closing on the house.
Lesson 2: Closing Costs Add Up!
Closing costs are the great unknown. They are another great reason to save high! In our case, the closing costs were paid by the seller. We only had to bring the down payment to closing. To give a little insight on what it costs to close a house in a MCOL area, the seller paid over $7000, including:
- $3331 in loan fees,
- $493 in taxes and other government fees,
- $713 in administrative fees,
- $1074 to fund the initial escrow, and
- $1442 in for a year of home insurance and property taxes to finish the year.
Make sure to keep closing costs in mind if you have an itch to buy a house you don’t plan to keep for that long. $7000 was over 5 months in rent for us. If we had been on the hook for the closing costs and then had to sell the house in the short term, it would be very difficult to recoup the cost.
Lesson 3: Emergencies Happen!
We’ve been lucky in our first year of home ownership that we haven’t had too many emergencies. Thankfully, they’ve been relatively cheap. So far, we’ve spent $532 on house emergencies, including:
- Ants! Everywhere! Then Fruit flies, Everywhere! ($12)
- Broken Garage Door Spring (OMG SO LOUD!) ($330)
- Damp Basement – read: De-humidifier, Now! Must Have! ($150)
- Stupid Drainage ($40) – I am nearly fluent in PVC these days.
In preparation for other emergencies, we’ve beefed up our emergency fund. Thankfully, with our emergency expenses this low, we’ve been able to cash flow everything, but a strong emergency fund helps me sleep at night.
Lesson 4: You’ll need stuff to manage the outdoors
Equipping our first house was a much bigger deal that I expected. I’d lived on my own for 8 years in an apartment, so I had the interior stuff covered. I could feed myself and keep the place clean with the stuff I already had. What I didn’t have was EVERYTHING for the outside. Want to cut down the black berry tree/bush thing that is staining your driveway and the inside of your car purplish? You’ll need a saw or some snips for that. Mow the lawn? Get the edges? Sweep out the garage? Rake the leaves? Move the snow? Oh, you both want to move snow at the same time? You’ll need to acquire tools to accomplish these things.
For one time or random tasks, I’ve done everything I can to borrow. However, most of these tasks aren’t one time things. I’ve made the extra (sometimes awkward) effort to ask long time home owners for their cast offs. All of our rakes, shovels and brooms came second hand. It seems each house has one or two extra the homeowner is happy to get out of the shed. Even with all of our second hand goods, we’ve still spent a pretty penny at the home improvement store.
In addition to all the things I needed to acquire (or borrow), the outdoors also asks you to get rid of stuff. I hadn’t planned for this. I used to live in the woods. Now I live in the city. I don’t have woods to toss my brush into. I don’t have a thicket that will absorb all my leaves. In the city, I have to bag this stuff up and take it somewhere. Twice, I’ve had to take it somewhere in my little Civic! (My poor Civic.)
I have no idea how much I’ve spent over the last year on outdoor stuff. $500? 1000? It feels like all my time and money. Hopefully, this will be my only major year equipping my arsenal of tools.
Overall, I’ve been happy with where we are 1 year into home ownership. It has come with surprises, but thankfully, it has been pretty easy financially. Here’s to year 2!