Plan a Budget Before You Purchase
Posted by Bill Mann on Saturday, February 18th, 2012 at 3:14pm.
Lewes Delaware Real Estate has become rather popular of late. Once you have made the decision to purchase your home, your next decision is usually how much you are willing to spend to purchase the home. In deciding on that purchase price one must consider what the costs of owning and maintaining that home will be.
Consider ALL Closing Costs: When calculating your closing costs remember to budget all items not just those associated with the legal work. Remember to include such items as the appraisal, termite, and home inspections. Depending on the location and age of the home other inspections such as radon and lead based paint inspections could be prudent.
Taxes: While Delaware offers home owners some of the lowest real estate taxes in the country, plus the advantage of no sales tax, no inheritance tax for most residents and no social security tax, plus a host of other retiree tax benefits one could ask why worry about taxes at all in Delaware. Well, one must still budget for the transfer tax due at settlement. This transfer tax is 3% of the purchase price and is typically split between buyer & seller. The formula for calculating real estate taxes in the counties of Delaware is varied and complicated but the current real estate taxes being paid on that property you are interested in purchasing are readily available. Also, keep in mind that properties are not reassessed when they sell or transfer to new owners.
Private Mortgage Insurance: Anytime the down-payment on a home is less than 20%, private mortgage insurance will be added on to the mortgage. This allows buyers to get into a home with less money but the payment of this PMI will cover the lender if the buyer would default on the loan. The good news is as you build up your equity, your PMI drops off.
HOA Fees: Be very careful to consider this cost even when looking for a home. It is very easy to fall in love with those resort like amenity filled communities but do not forget that these extras will come at a cost. These HOA fees can easily add $100s to your household budget every month. Don’t forget too that there will be community restrictions on what each homeowner can and cannot do. At times this may work in your favor and other times maybe not. It is something you will want to carefully consider.
Homeowners Insurance: Any lender is going to require that you insure your property. The cost of that insurance will be dependent upon many variables such as the size of the home, its age, where it is located, etc. Some areas are considered high risk resulting in a higher insurance cost and in some cases companies may not even insure homes in a particular area.
Utilities and Appliances: One can go from a rental with all utilities included to home ownership and not be aware of the costs involved to pay utilities each month. The cost of heating, cooling, cable, etc., can be quite surprising to those who have not had to cover these costs. Once you become interested in a specific home, you should request the costs of utilities from the current owner. Additionally, you must consider maintenance and replacement costs for appliances. You usually do not have the luxury of knowing exactly when something will fail but establishing a maintenance account for your household can insure that money will be there when you need it.
Broker Associate / Owner
Mann & Sons, Inc. REALTORS®
302.542.1696 Cell • 302.227.9477 Office