Key In Door

Photo: Flickr user Alan Cleaver

Buying a home can certainly be cheaper than renting, but it might not be quite as affordable as you think. Many first-time homeowners get caught off-guard by the various expenses that come along with homeownership -- for example, the first time something breaks, it can be quite a shock when you realize that you're responsible for repairs. With that in mind, here are three homeownership costs you'll want to be fully prepared for.

Matt Frankel: One homeownership cost that I certainly wasn't anticipating the first time I bought a house was the cost of insurance -- specifically, the fact that basic homeowner's insurance may not be enough.

Now, homeowner's insurance is generally not terribly expensive. It covers events like fires, damage caused by leaks, and liability protection, and its cost depends on factors such as the age and size of your home and your geographic location. In general, homeowner's insurance should cost in the ballpark of 0.5% of your home's value per year -- so, if you buy a $200,000 home, you should expect approximately $1,000 in annual homeowner's insurance expense.

What caught me off-guard were the special types of insurance I had to obtain since my house was in a low-lying coastal area -- flood and windstorm insurance. Flood insurance is subsidized by the government and is available for up to $250,000 worth of building coverage, the cost of which can easily be $3,000 or more per year (even after the subsidy), depending on the elevation of your property. And just because your house isn't in a coastal area doesn't mean you are exempt. Nearby lakes and rivers could also force you to obtain a costly flood policy.

Windstorm insurance is required in hurricane-prone areas, like Florida, where my first house was located. Costs vary widely based on several factors, such as the type of shutters you have and your roof's construction, but this can easily be the most expensive type of insurance you're required to get.

My point is to make absolutely sure of the types of insurance you'll be required to carry, and the estimated cost of each. Insurance requirements made my mortgage payment on a modest South Florida home jump by about $700 per month.

Selena Maranjian: When it comes to buying a new home, many people focus on the price of the house and the cost of buying it, but think little about the cost of actually owning it. Some completely overlook the cost of utilities, for example, while others underestimate that cost. Overlooking some critical costs of home ownership can wreak havoc with your budget and financial health.

One mistake people make when failing to properly prepare for utility costs is that they don't appreciate how much costlier utilities can be in a bigger home. They may buy a bigger house to accommodate a growing family, but not realize that their electricity and gas will cost perhaps 50% more. Another error happens when people move from one geographical region to another, as utility costs can vary widely across the country. According to a CNN/Money cost-of-living calculator, moving from Denver to Boston will result in utility costs that are 39% higher. Yikes! Move from Chicago to Atlanta and you can expect to pay around 11% less.

Fortunately, utility costs are somewhat in your control. There are steps you can take to lower what you pay for power, heating, and cooling. For example, money spent adding insulation to your home or replacing aged major appliances with energy-efficient models can pay for itself in a few years. Another trick to keep cooling costs down is painting your roof white, so that it absorbs less heat from the sun. Programmable thermostats, washing and rinsing clothes in cold water, and turning off lights and electronic devices when not in use can also save a lot. A little online searching will turn up gobs of other money-saving tips.

You probably can't do without electricity, heating, or cooling, but you can definitely spend less on them than you're spending now.

Brian Stoffel: When you're a renter, you often don't have to think about the cost of fixing the leaky sink, or the broken air conditioning unit. You simply call up the landlord, and hope that the problem resolves itself in a timely manner. Your expenses don't increase a dime.

But once you buy a house, it's a different story. One of the biggest expenses new homeowners overlook is maintenance. The tricky thing about this is that you can go months without incurring any large expenses, then be hit with a huge bill in a very short time frame. Furnaces, air conditioning units, stoves, roofs, and windows can all be very expensive.

It's usually a good idea to budget for these items. The age and general condition of a house will play a huge role in the maintenance costs. But to get a good ballpark figure, I would suggest taking the higher of (1) spending 1% of the home's value per year on maintenance, or (2) spending $1 per square foot per year.

For instance, if you have a $300,000 house that's 2,500 square feet, I would suggest preparing for at least $3,000 in maintenance costs (vs. $2,500). By doing this, you won't be left wondering where all your money went at the end of the year.

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