Homeowners Expenses. Kinda weird question?

Question

I am trying to convince a very good friend to not buy a house. She lives in Kansas City Missouri. She can barely make the rent payments every month and houses are very expensive here but she is naive and believes she can do it. I am trying to find information to show her exactly how much everything costs and try to make the point that it is a bad idea. So where can I find all the information? I hope all this makes sense.

Answer 1

From the information you give, you can't prove that it is a bad idea. Don't get me wrong, you are probably right - but only probably. Furthermore, home ownership has many benefits that don't show up in a cash flow statement right away. If she can really make it work, with a stable loan payment and everything (fully amortized and with the rate fixed for at least five years), chances are that she'll come out way ahead.

When you first buy, owning is more expensive than renting. If it isn't, why didn't you buy earlier? If she can barely make it work renting, chances are against her. Principal and interest on the loan - rates for people with good credit are in the high fives to low sixes right now (thirty fixed), depending upon how much you pay in points. Take the loan amount and any financial calculator will tell you how much that payment will be. Property taxes (every state is different. Call the county tax collector). Homeowner's insurance (ask an insurance agent). Association dues, if any. Utilities will be about what she;s paying now if the properties are of similar type, but she'll need a Monthly allowance for maintenance - she'll need to build up a reserve because this stuff happens. How much do people spend in your area? If you're a property owner, you should know. Not to mention all the money most people blow on home furnishings when they first move in.

Answer 2

This is a very good question, your friend thinks that home-ownership equals easy street, and it doesn't. Here is what I pay in Indiana. This is an $84,000 home with $5000 down, and 5% interest rate (at the time I bought 4 yrs ago I was 22). $600/mo for mortgage with PMI (taxes and other crap included) property taxes are about $1000 a year, I do have home-owners insurance but not sure how much a month (my wife does), I do my own lawn care but mower cost me $250, leaf blower $125, weed-eater $90, chainsaw $225. I just had my bathroom remodeled this year and that cost me $2200, last year I had my living room and hallway to the bedrooms remodeld (carpet, furniture, new ceiling, paint, and fireplace door) and that cost me $4000. Also I had a tree that needed to be topped due to an ice storm breaking off some branches (2 yrs ago) that was $500. This is just some expenses I have incurred the last 4 yrs alone, and thank God I have a good job to help me along the way, and also my wife works. It would be hard on a single income to own just this home at $80,000. This does not include regular monthly's (phone, gas, electric, car payment, groceries, car insurance, hobbies, etc.) Hope this helps.

Answer 3

Any real estate agent will have that info. Average utilities and homeowners insurance. Tell your friend that property taxes are the key. My mortgage is 900 per month. However, for first time buyers with low down payments tha bank will want to escrow taxes. My monthly payment is 1340 per month because of escrow. But, on the bonus side, after a few years, if values increase there is always the possibility to sell and get equity back. Buying is probably a good idea if there is a large down payment. But don't worry about your friend. The mortgage brokers won't broker a deal if she can't really afford it.

Answer 4

Homeownership can be really great, and there are many benefits. However, if a person is not able to afford the mortgage payments, property taxes, water/utility bills, etc, the benefits are simply not worth it.

Here are some rules of thumb. Including property taxes (which vary by city/county) assume $700 per month of expense for every $100,000 borrrowed. This includes principal and interest payments, as well as property taxes). This assumes good credit and average property tax rates. Add utilities/water/sewer/ garbage.

Keep in mind also that interest payments are tax deductible, as are Property Taxes.

Good Luck, and remember that sleeping under someone else's roof is better than "owning" your own roof and not being able to sleep!

Answer 5

I am a Kansas City Realtor. Have her call my office, 816-313-8876 or email us and we will help her go over an income-expense analysis with a mortgage guy.

We also may be able to help her find a rent-to-own that may work out better.

This is a GREAT time to buy the market is awful for the sellers. It is definitely a buyers market!

Any decent mortgage lender will try to help her figure out what she can afford. Buying is SO much better than renting if you plan to stay in the area for a few years.

She may be able to get a mortgage that is lower than her rent.

We also have hundreds of rental properties available. Go to the website I list below and check it out.

Answer 6

Good luck going to one place. Just ask someone who knows. Owning your own home is a good thing to do. Where I live my mortgage is actually less than most rents. You gotta find the right place. Income helps. Dave Ramsey is a nice guy and has good ideas. If i listened to him I would not have my home. (Im pretty good on stretching a buck but things are tight. Doin it though) But his theory is good. Never spend more than 1/4 of your income on your property. If you do he says it could lead to financial problems because lifes other expenses will catch you. and they do. When you own you pay for all the problems out of your own pocket. You are the landlord. Taxes never seem to stay put. Property taxes keep going up. And home insurance, liability. Furnace breaks and floods you home, Insurance dont cover everything. so its can be hard.

Answer 7

Create a list for her. Write down her current income and expenses with renting and compare it to her current income and expenses after she buys the house (mortgage, taxes, insurance, lawn care, utilities (they are usually included in the rent pmt but she pays them herself if she buys the house), ect) when you show her on paper the money difference I hope that she will be mature enough to realize that she is not ready for such a huge step. If she is still stuck on the idea try to convince her to buy an apartment-they are cheaper and don't have as much maintenance.

Answer 8

Utilities
Cable
Internet service
Phone
Insurance
Taxes
Repairs