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I am hoping to buy a home within the next couple of years. I know what I can afford, most of the steps involved, and certain things to look for. I plan to go through the VA home loan deal.
But one thing that keeps getting mentioned as I do my research is the "unexpected" expenses that come with owning a home. I understand things break and so on, but I was wondering if anyone could give me some real first hand tales of trials they had after purchasing a home. I would have thought if the home is inspected, then major things like cracked foundations and leaking roofs shohldn't be a problem within the first couple of years. But it seems like that's one thing that is a pitfall for first timers, not realizing the costs of owning outside of the mortgage/tax/insurance/closing, etc.
What are the real issues? Structure? Higher utilities?
A lot of those things can be covered with a home warranty, which is fairly inexpensive given the cost to replace or repair major things - roof or AC for example. You should be able to get a decent home warranty for $400-$500 a year. Like most insurance companies, home warranty companies can be a little shady to work with. Doing things like denying claims on the first submission for some trivial reason. It takes a little effort to convince them sometimes - meaning you will have to pay another technician to come out and give you a second opinion etc. but the end justifies the mean... more on that below.
While the inspection is a necessary step for your own piece of mind, remember that they are only inspecting what they can see in the time they are there - they won't catch everything.
I've purchased 3 homes over the last 12-13 years and two of those times I've bought homes that were right at 10 years old. Consequently, 10 years is about the warrantied lifespan of most air conditioners. I've had a compressor go out ($3,500 covered by our home warranty) and the next time, I just bought a new system to the tune of $8,400 out of pocket. On the first AC that had the compressor go bad, initially the warranty company denied the claim because the person they sent out to repair the AC said our filter was dirty and that caused the compressor to go bad. That was a lame ass excuse so I called another technician that wasn't on the warranty company's payroll and he told me that dirty filter diagnosis was bogus so I challenged the first claim denial with the results of my technician's findings and my second claim was approved. So, ultimately that $3,500 repair was covered but it took a little work on my part.
That home warranty was included when I purchased the home so it cost me nothing. I did not renew with that company but, every time I buy a new house, I've made sure it had a warranty for the first year so I could live in the house and get a feel for the condition of the property before deciding whether or not to continue with a warranty.
I wouldn't worry much about your foundation (this will be covered under your home owners insurance - not the same thing as a home warranty) but understand things will break that won't be covered under your insurance but will be covered under your warranty if you buy one... hot water heaters, appliances, AC, plumbing, roof etc. all things that can and will break and there is no longer a landlord to call to repair them.
One thing to note about using your VA benefit. I had to learn this the hard way. The VA benefit is something that you're supposed to use just once. The fee for first time use is low. I sold my first house for a profit that my wife and I turned around and used toward our wedding ($20k ish). I used my VA benefit again on my second home and thought the fee seemed a little high the second time but not so much that it hurt. The second home we bought at the height of the bubble around 2007 and sold it right as things were starting to pick back up in 2013. We didn't lose any money but we didn't profit any either after closing costs. So, the third time I used it, the fee was pretty high, close to $13,000 to use my VA benefit again. It was too late for me to go and find other financing at the last minute like that.
I reached out to the VA to find out the story and they told me that the VA benefit is intended to be a low cost mortgage to get you into your first home, with the expectation you will stay there a while and build up some equity. So, when you sell, you have some money to put down on your next home and can go with a more traditional mortgage. The VA benefit will always be there for you, so long as you are only using it on one house at a time, but keep in mind it was designed to be used once and gets very expensive in subsequent usage.
Other things to think about when buying your first home. You are probably going to have to buy a refrigerator, washer and dryer. Those are typically not included with the home when you buy the house. You will also probably need to buy a lawn mower and other lawn equipment as well as learning how to use that stuff. A book on routine home maintenance can be found on Amazon or at Home Depot or Lowes for $20-$40 and it is well worth the money. There are a lot of things you will be able to fix yourself inexpensively and other things you will need to call a pro for. Never underestimate the knowledge of the people working at Home Depot or Lowes, they typically know their stuff. I can't count the number of times I had something relatively simple to repair like a leaky toilet and was prepared to pay a plumber $100 to come fix, only to get the advice of someone at HD or Lowes and realize the part to replace was $3 and I could do it myself in about 15 minutes.
Good luck to you in your home search.
One last piece of advice I would give you and take this with a grain of salt - during my first home search, I was dead set on the idea that I could only afford so much for a house. I couldn't afford to go even $1,000 over that amount. Over the course of a 30 year mortgage, even a $10,000 price difference will work out to be less than $100 a month in a mortgage payment when it is all said and done. I say that to encourage you to get the exact house you want and not to worry so much about it being $5,000 or even $10,000 above your budget. Look at homes within your budget but, if the perfect home comes along and it is a little over your budget, don't be afraid to pull the trigger.
I stayed strictly under my budget on my first house and about a year in I realized I wish I had gone with a home I passed on because it was $3,500 over my budget. After a promotion and a raise at work, I was able to afford my second home, which was about $65,000 more than my first home. Had I just bit the bullet and bought the $3,500 more expensive home the first time, I would have had EXACTLY the house I wanted with no need to pay $65,000 more the next time. Heck, I might still be in that house today and close to paying it off.
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Thank you SO much for all of the info! I had no idea that the VA fees would increase that much. Actually, I only learned a few days ago that it can be used more than once at all.
I have made sure to budget for things like appliances and yard tools. My ex husband and I rented a house a few years back after only living in apartments and while not nearly the responsibility of owning, my eyes were opened to thw costs of lawnmowers, service calls, pest control, etc.
Thank you again!
I can tell you when I bought my house I was a wreck envisioning the movie "The Money Pit" with Tom Hanks before closing. I bought a 1920's house so it had some awesome millwork and character that could not be passed on. The inspection mentioned quite a few things and looking back we were way to easy on the seller's and should have had more fixed but we wanted the house and didn't want to create waves I guess.
I had no carpentry/ plumbing/ electrical etc. experience but like bspray mentioned- many things can be fixed cheaply if your willing to learn and do things yourself. I've replaced a broken window/ faucets/ sink/ toilet/ outlets/ drywalled/ painted/ replaced fascia boards/ tiled/ landscaped and much much more. I can tell you- if you are not afraid the experience you will gain will give you a lot of confidence. I can't tell you how much money I've saved doing things myself and it's awesome when you do a project and it's completed and you think how much you saved from hiring someone else.
It is important to have a cash cushion because things can & will come up that are unforeseen. I don't place a lot of creed in the age of things- a new A/C can go out just as easy as an old one. Our A/C is 1996 and my theory is I keep people's mit's off it- I do not do annual servicing- I change the filters on a regular basis and ensure that the coils are kept clean. Have not had an issue- oh yea- did have to replace the thermocouple in the furnace some years ago ($7 fix).
The home warranty is good if it comes with it but go with your inspector and listen to what he has to say and shows you. Enjoy!
Bspray says don't worry about foundation problems, they'll be covered by homeowners insurance. I don't know what sort of problems he/she is talking about, but I've never known any foundation work to be covered by homeowners insurance at all.
There are unexpected repairs,but there is also a ton of stuff you end up having to buy. And it only starts with the lawn mower. Think: ladder, hoses, weed whacker, pruning shears, and then inside even stuff like additional trash baskets, kitchen cabinet liner, throw rugs, etc. etc. It never ends.
Also -- do your homework on realtors. If your area allows it, use a buyer's broker. The seller's broker works for the SELLER--not you. Not your interests. The seller's broker isn't going to offer information benefiting you -- about the home or area. They're not going to lie (or they shouldn't), but at the end of the day, their job is to sell the house for their client for the best price.
Also -- do your homework on realtors. If your area allows it, use a buyer's broker. The seller's broker works for the SELLER--not you. Not your interests. The seller's broker isn't going to offer information benefiting you -- about the home or area. They're not going to lie (or they shouldn't), but at the end of the day, their job is to sell the house for their client for the best price.
And remember too, that while a buyer's agent is working for you, he/she doesn't get paid anything until you buy a house - so he/she has a vested interest in you buying SOMETHING. And the more expensive the house, the more the buyer's agent is getting paid. The buyer's agent is on your side, but only up to a point.
And bspray is right: home inspections can miss things, and even with a good inspection, unexpected problems can develop later. A roof leak, for example, can develop at any time; all that needs to happen is for a few shingles to be lost or for some flashing to be dislodged during high winds or a storm. Fortunately if the rest of the roof is in good repair, fixing a roof leak usually isn't super expensive, but figuring out exactly where the leak is originating so it can be fixed can be a maddening process. Likewise, modern appliances aren't known for their durability, so even if they're working at the time of the inspection, they can crap out 6 months later. And pest infestations can also develop quickly and unexpectedly.
Don't get too freaked out: All houses have problems, and most of the time they are minor and fixable. You just want to be both financially AND psychologically prepared so that when they do occur, you can handle it.
+++++ to the post on the buyers agent looking to close a quick deal, not working for you.
OP, the odds of all the big things happening at once are miniscule. Just hold aside $30,000 or so in easily accessible savings and that should cover anything homeowner's insurance doesn't.
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