What costs are involved in owning a home in Maryland?
I always tell my clients that it is important for them to determine what a COMFORTABLE monthly payment would be and not necessarily to purchase a home at the mortgage for which they can qualify. These two numbers can vary WIDELY! When determing the true cost of home ownership it is a good idea to consider all costs. This is a basic list that you may find helpful when budgeting for your new home.
1. Mortgage : Principal and Interest payment.
2. Property taxes which is based on your purchase price. Taxes are based on a percentage of the assessed value and varies by county.
3. Mortgage Insurance or (PMI/MI) If you put down less than 20% most lenders will require mortgage insurance. The mortgage insurance protects the lender in case of your default (failure to pay).
a. Conventional Loans –Mortgage insurance is required until the loan reaches 80% of the purchase price
b. FHA Loans-Required up front mortgage insurance (UFMIP) that is financed into the loan. UFMIP is currently 1.75% and is paid directly to the Department of Housing and Urban Development.
c. 30 year-Monthly Mortgage Insurance (also called Annual Mortgage Insurance) must be paid for at least 5 years AND until the loan reaches 78% of the purchase price. Current rates (April 2012) 1.25% for loans over 95% Loan to value (LTV), drops to 1.2% for loans below 95%.
d. 15 year-Monthly Mortgage Insurance (also called Annual Mortgage Insurance) must be paid only until the loan reaches 78% of the purchase price. There is no minimum time frame requirement.
e. VA Loans-There is no monthly mortgage insurance. VA loans do require a funding fee that is typically financed into the loan.
f. USDA Loans-Also called Rural Development (RD) Loans. Now require a monthly mortgage insurance of .35% for the life of the loan.
There are programs where you may purchase with less than 20% down with no mortgage insurance, typically the interest rates are significantly higher.
4. Homeowner’s Association Fees-This can vary from zero to hundreds of dollars a month depending on the community amenities. Some communities have an additional fee
5. Homeowners insurance (also called Hazard): This protects the structure (cost to rebuild) and contents (all your stuff), and has other benefits. Pricing, deductibles and coverage varies widely by policy and company.
6. Flood Insurance: If you are in a flood zone, you will be required to carry flood insurance. Costs vary widely.
7. Refuse: Depending on the area, you may be required to pay a service to pick up your trash. Many counties/areas include this as a part of your property tax.
8. Utilities: Public Water/Sewar, Cable, Phone, Gas/Electric (you can request an average from the owner or call the gas/electric co. to get an average , Well/Septic, phone,
9. Lawn care/maintenance –mower, grass seed, mulch, etc.
10.Termite: I have heard that there are two types of homes in Maryland, one that has had termites and one that will get them. It may pay to have an annual contract for pest control. This could run from $50 to $150 per year.
11.Repairs-Minor: This can vary widely depending on the age and quality of construction of the home. It is always a good idea to have a fund of $500-$2500 to cover general maintenance.
12.Repairs-Major: For major repairs such as a roof, windows, well/septic it is a good idea to have an emergency fund to cover any future major repairs. You can contribute a small amount to this fund with each paycheck so if you do have a repair, you hopefully won’t have to resort to using credit. Your home inspector can give you an idea of the expected roof life expectancy. If you have a concern, you can pay a roofing company to give you a full inspection and warranty.
You will also want to consider the cost to furnish and decorate your new home. You don't want to purchase a home and have to sit on the floor or sleep in a sleeping bag (at least for too long)!