April 2022 - Mercer Savings Bank

When you’re buying your first home, it’s easy to be persuaded by the little details – the finished basement; the enormous walk-in closet; the wraparound porch. But it’s also important to keep in mind what you’re really paying, and how long you’ll be paying it.In this blog, we’ll explain some of the costs of buying a home to be aware of – and some ways to determine if a house is fairly priced.Additional Costs of Buying a HomeYou may focus just on the sticker price of your potential new home. But there are several other costs – both short-term and long-term – to factor into your budget.Consider the following closing costs as you determine how much you’re willing to pay for a home. Sometimes who pays these costs – either the buyer or seller – can be negotiated.Short-Term Home Closing Costs to Keep in MindLender fees and mortgage costs. These include your down payment on the home – anywhere from 3 percent to 20 percent of the purchase price. There are also origination fees, which are the costs to process your loan application.Inspection costs. These can be a few hundred dollars. It’s strongly recommended to have any home you’re planning to buy inspected – read more on this below.Appraisal costs. Similarly, the cost to have the value of the home appraised independently can be several hundred dollars.Title services. Just like a car, the title to a home needs to be transferred to your name when you purchase it. In Ohio, this is at least $1 per thousand dollars in property value, but individual counties may have additional fees.Long-Term Costs of Owning a HomeHomeowners insurance. You’ll need to budget for your homeowners insurance policy. The total cost will depend on your location, insurance company, specific home features, and more, but expect to pay $1,000+ per year.Property taxes. Taxes vary depending on which city you live in. For current Mercer County tax rates, see the Mercer County official website. For Darke County rates, click here.HOA fees. If you live in a neighborhood that has a homeowners association, you’ll likely enjoy having someone else mow your lawn and remove snow – but expect to pay $100+ a month.Repairs and upkeep. It’s hopefully not something you’ll need to do right away, but keep in mind that the need for major repairs can and does happen. On the other hand, if you plan on significant renovations to your home after you move in, you’ll need to factor that into your budget.While there are other costs you may encounter when you purchase a home, these are some of the biggest to keep in mind.Comparing Home Costs and ValuesIn one sense, home costs can be subjective. One buyer may be willing to pay more for certain features than another. But in another sense, home costs should also make sense for what’s included and what’s happening in the market.If you plan on moving again at some point, you’ll also want to be positioned to make money from the home sale. Although you can’t predict the future and what the market will be doing years from now, you can make some educated guesses for a safer choice. Consider the following factors that nearly always increase a home’s valueProximity to desirable local amenities – like parks.The quality of the school district.Square footage – generally the larger the home, the more expensive.The number of bedrooms and bathrooms.Money Magazine explains that some features – like an inground pool – may seem like they’d fetch a higher price, but not all buyers want to take on the additional costs and upkeep.You’ll also want to take a look at comps, or comparisons to homes in the neighborhood. Your real estate agent can provide these, or you can do this yourself by looking up what a nearby home sold for on the county auditor’s site. If a home is listed far above (or below) similar homes nearby that sold recently, it may be prudent to find out why.Finally, independent home appraisals help keep you from overpaying for a home. A professional appraiser will assess the home and assign it a value. If it’s close to what you’re paying, all is well. But if it’s appraised for far below the asking price, the home likely isn’t worth what you’re paying for it.Ultimately, what you’re willing to pay for a home is up to you. But it’s best to do your homework to make sure you’re getting a good value for your money.Do I Really Need a Home Inspection?Imagine that you’ve just closed on the home of your dreams and are preparing to move in. But right as you do so, you find out the furnace needs to be replaced. And then you discover a major leak in the basement, which is causing mold to grow.This situation could have been avoided with a home inspection before closing. There are a few important reasons to get a professional inspection before you purchase a home. First, it may uncover potentially major issues, like the furnace and mold scenario above. Typically, this is a chance for you to either ask the buyer to cover the costs of repair or back out of the contract.Inspections can also reveal any additions or components of the home that were not added to code – and which will therefore become your new problem!Some buyers skip the home inspection because they know the seller or trust them to disclose any issues. But even if the homeowner has disclosed everything they know to you, there may be other problems they aren’t even aware of. So to play it safe – and potentially save yourself money in the long run – and opt for the inspection.How Much Home Can You Afford?When determining your home budget, sometimes it’s not just a question of how much you can afford but how much you’re to pay.Do you want to live in a specific town or neighborhood? Do you absolutely need a large home for a growing family? Do you want your kids to attend a particular school?A smart home investment takes into account not only your needs now, but what you’ll need in the future.To get a general idea of a manageable mortgage amount, some people like to use a mortgage-to-salary ratio. According to Investopedia, “most prospective homeowners can afford to finance a property that costs between two and 2.5 times their gross income.”So, let’s say someone makes $50,000 a year. If you go solely off of the mortgage-to-salary ratio, that person could afford a mortgage of about $100,000 to $125,000.However, it’s important to keep in mind that the ratio amount isn’t the final answer. No matter what number you end up with, you still want to make sure it will fit your budget.It’s also a good idea to talk to the lending representative at your bank, such as our Mortgage Specialists here at Mercer Savings Bank. They can review your financial information and personal situation and give advice as to what kind of mortgage best suits your needs and financial situationRead our Mortgages 101 Guide