Before making an offer, determine all the costs of owning a home

home costs example

When setting a budget for the purchase of a home, you have to look beyond the asking price. If you are a first-time buyer, you might be surprised at the other costs that go into owning a home.

For starters, there are taxes paid to the local government and insurance, required by your lender. Those costs are normally escrowed and rolled into your monthly mortgage payment.

So if the principal and interest on your mortgage is $1,000, you might expect another $200 to $300 a month added to that, depending on where you live. And where you live, it turns out, will be a factor in those other costs of owning a home.

Angie’s List used U.S. Census’ American Housing Survey data to calculate what it calls the hidden costs of homeownership — including utilities, real estate taxes, property insurance, maintenance and repairs — in 54 major metro areas as well as every U.S. region.

Most and least expensive markets

It found the most expensive places to own a home are found on the West Coast, and in particular, California. San Jose tops the list, followed by San Francisco, Anaheim, Oakland, San Diego, and Los Angeles.

At the other end of the scale, the most affordable metros in which to own a home are Pittsburgh, Birmingham, New Orleans, Buffalo, and Oklahoma City.

Among the biggest drivers to these costs are property taxes, utility bills, and insurance premiums. For example, most Texas cities have relatively low property taxes but high electricity costs. A rural area without a nearby fire department will result in higher insurance premiums.

Percentage of income

There is another way to look at homeownership costs, and that is as a percentage of monthly income. This is where you can best measure whether it is more affordable to own a home or rent.

Angie’s List measured the total homeownership costs in 54 metros against the median household income in each market. By that measure it determined that Oklahoma City is the most affordable place to own a home, requiring just 16% of monthly income.

Again, the most expensive markets are in California. Housing costs in Riverside gobble up 28% of income, followed by Los Angeles at 27%, and Anaheim, Sacramento and San Diego at 25%.

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