The process of homeownership entails a wide range of costs and expenses. Aside from the mortgage and down payment, you will have to incur other expenses and costs, including property taxes, homeowners’ insurance, attorney fees, closing costs and more.

In this article, we will walk you through the total costs of home ownership with a strong emphasis on using an affordability calculator while devising your budget. 

Here, take a look:

Down Payment

A down payment is a vital cost and you must save up to make a sizeable investment, at least 20-30% of the total home investment. It will allow you to maintain a healthy debt-to-income ratio and reduce your overall financial burden. 

Closing Costs

Closing costs are the expenses associated with the logistics and conclusion of the property and its transfer to your name. It typically includes attorney fees, home inspection fee, appraisal fee, title insurance, loan origination and more. They typically constitute 2-5% of the total homeownership costs. 

Mortgage Expenses 

The mortgage is the most significant expense that you incur and it is important to use a mortgage calculator to understand your monthly and yearly payments and affordability. The principal amount refers to the money you loaned in order to buy your house, while the interest is the fee you pay for the loan obtained. 

Interest rates are likely to vary and change, based on the fiscal condition of the economy. It is important to shop around for interest rates until you find the one that meets your affordability. Private mortgage insurance is another feature of your mortgage payments, and it provides coverage to the lender in case you are unable to pay back the loan. They typically make up less than 1% of your yearly expenses. 

Property Taxes & Insurance

Property taxes are the only feature of your monthly and yearly payments that are constantly changing, and the trend typically focuses on increments. Property taxes are endorsed by the local governments to drive their revenues and public funding. They depend entirely on your state, county and location. Lenders allow you to submit the amount into escrow accounts, and then, break down tax amount into smaller monthly payments. 

Homeowners’ insurance is another monthly payment that is deposited into an escrow account, and your lender makes the payments on your behalf. 

Aside from the monthly payments associated with your mortgage, you will also have to pay for the maintenance and upkeep of your property. Utility bills will take up another sizable chunk of your income.