Costs of buying a home
If you’ve never owned a home before, you might be surprised by some of the expenses. Even if you have bought a home in the past, maybe you set up auto pay and forgot about the individual bills. It is important to consider the costs of buying a home when you decide on your budget for purchasing a home.
If you’ve been living in an apartment or renting, water/sewer/garbage may have been covered in your rent. In an apartment, you probably paid for power and renter’s insurance separately. The costs of home ownership are different than those experienced by renters.
Some of the expenses to consider when setting your monthly home budget include water/sewer/garbage, gas/electric, homeowner’s insurance, mortgage insurance, property tax, and the actual mortgage payment.
Utility expenses for home owners
First off, we’ll discuss utilities. Depending on the location of your desired home, providers and rates vary. When you live inside city limits, water, sewer, and garbage are usually handled by the city. Occasionally a city handles energy as well, but often a private company will handle gas and electric.
Sewer and Garbage expenses
In Spokane (proper), most homes are connected to sewer. The city charges a flat rate for sewer, storm-water, and garbage. You can see sewer and garbage rates for single family homes in Spokane here. If you want more specifics about utility billing and recycling you can click here or call My Spokane at 311.
Water expenses
City water charges include a flat rate plus a usage fee. If you’re not sure who handles the water for a certain area, you can use this service to find your water provider.
Energy expenses
Most homes in Spokane (proper) have power and/or gas services through Avista. Avista’s website offers a service where you can look up the high, low, and average utility rates for a specific address. If you’re looking for a home outside of the city limits your property might be serviced by Inland Power or another service provider. You can call either company or visit their websites to get an idea monthly charges.
Properties on acreage
If you are buying a home with land (not in city limits) it is probably not connected to public sewer or water. In most cases, homes with land are on a well and septic system. This means that you will not have to pay a water and sewer utility bill. Instead, you will need to get your septic tank pumped out every few years (depending on the size of the tank and usage). You should also test the well for quality and quantity. In addition wells use power to pump water. This means your energy bill could be slightly higher than that of a home on public water.
Insurance expenses for home owners
Homeowner’s insurance
The next cost you will want to consider is insurance. There are multiple kinds of insurance you may need.
The first is homeowner’s insurance. If you already pay for auto or renter’s insurance, you can call your provider to get a quote. If not, you can shop around for a provider and get multiple quotes.
The cost of homeowner’s insurance varies, but is based on things like zip code and home size. The average cost of homeowner’s insurance in Washington state is $653 annually. Typically, homeowner’s insurance is paid alongside a mortgage. The annual cost is split up by your lender as a monthly rate and added to your base mortgage payment.
Mortgage Insurance
Homeowners insurance and mortgage insurance are not the same. Mortgage insurance is used by lenders to protect against non-payment. Lenders can also accept lower down payments (less than 20%) because of mortgage insurance. You may pay mortgage insurance alongside your monthly loan payment. Or you might pay it all at once up front. This is usually based on the type of loan you are getting.
Property Tax Expenses
Once you’ve figured out utilities and insurance, you’ll want to consider property tax. Property tax also varies based on location, neighborhood, and size of the home and land. You can visit the county assessors website to see actual charges for property taxes on specific homes. Many home search sites including the Todd Sullivan Team and Zillow also show property taxes for specific homes. You can get an idea of what your property tax would be by looking at a few homes that meet your criteria.
Property taxes are generally paid to the county on a bi-annual basis. However, if you are getting a loan to purchase your home, the property taxes will likely be added in with your monthly payment.
The Price of the Home
The final and largest expense you’ll need to consider when buying a home is the actual purchase price. If you’re paying with cash, this will be pretty straightforward. How much can you afford based on how much cash you have on hand?
If you are not paying cash, you will need to acquire a home loan. The amount of money you can get for a loan will depend on your credit score, annual income, and the amount of money you can afford for a down payment. There are several different types of home loans and we recommend discussing these options with a lender to determine which type would best fit your needs.
You can also discuss your budget with your lender. Let your lender know what your ideal monthly payment would be and they can give you an estimate for the price range of homes you should be looking at. While you may be able to qualify for a larger sum of money, you want to make sure you can comfortably make your mortgage payment. It is important to evaluate your monthly home expense budget and not buy more than you can afford. Even if you qualify for a certain amount, make sure it fits with your monthly budget.
Basing your budget on the costs of home ownership
Once you’ve evaluated the costs of buying a home, you can determine your home budget. If you have questions, you can always discuss the expenses with your Todd Sullivan Team agent or with your Lender.
