Owning a home is a dream for many, and affordability is often the make-or-break factor when it comes to purchasing your own house. While the focus of the affordability conversation is often on mortgage payments, homeownership comes with additional expenses beyond what you pay toward your home loan each month. Understanding these costs can help you plan and budget effectively and determine whether homeownership is right for you right now. 1. Property Taxes Property taxes are a significant ongoing expense for homeowners—and as the value of your home rises, so too can the amount of tax you owe. This is because the amount varies depending on the assessed value of your property and local tax rates. Property taxes are often rolled into monthly mortgage payments so you can avoid paying one large lump sum. Check with your lender or take a look at your mortgage bill if you’re not sure if this is the case for you. 2. Home Insurance Besides being your home, your property is an investment, and protecting it is key. You do that by purchasing home insurance, which covers damages to your property and its contents. If you’re paying for a mortgage, home insurance will be required by your lender. If your home is paid off, carrying home insurance is still a good idea to protect it against unforeseen circumstances. Shop around for the best rates and coverage to ensure you have adequate protection without overpaying. 3. Utilities Owning a home means you'll be responsible for all the utility bills such as water, sewer, electricity, gas, trash removal, and internet. The costs of these services vary based on the size and location of your home as well as your household’s usage patterns. Taking steps to conserve energy and water can help keep these bills in check. 4. Maintenance and Repairs Homes require regular upkeep to stay in good condition and maintain their value. This includes tasks like landscaping, gutter cleaning, painting, inspections of major systems, and more. Hiring a professional to do these tasks will often produce better results—but even if you’re an avid DIY’er, you’ll need to factor the cost of tools and supplies and your time into your budget. Additionally, the need for unexpected repairs can arise, such as a leaky roof, malfunctioning appliance, or a burst pipe. Building a reserve fund for these unforeseen expenses is a wise financial move that will help prevent extreme stress on you and your budget. 5. Homeowner's Association (HOA) Fees If your property is part of an HOA, you'll likely have monthly or annual fees. These fees vary widely and can add hundreds of dollars to your monthly cost of homeownership—so make sure you’re fully aware of them before you purchase a property. They should be detailed in your contract before you purchase a home, including the monthly or yearly cost, what the fees cover, and how much they can increase each year. The upside is that the funds you pay to an HOA contribute to the maintenance of common areas and community amenities, which can greatly improve your home’s value and your quality of life. 6. Appliances and Furniture While not a regular expense, you may need to replace or upgrade furniture and appliances at times. Having a fund for these occasional but significant costs ensures you're prepared when the time comes. 7. Home Improvement Projects Many homeowners undertake improvement projects to enhance their living space or increase property value. Whether it's a kitchen remodel or a new deck, budgeting for these projects can help you achieve your goals without straining your finances. 8. Home Security Ensuring the safety of your home and family may involve investing in security systems, cameras, or smart home technology. While these expenses are optional, they contribute to peace of mind and the overall protection of your property. In conclusion, the cost of homeownership involves more than just mortgage payments. Being aware of these additional expenses and planning accordingly can lead to a more secure and enjoyable homeownership experience. Take the time to assess your budget, plan for the long term, and make informed decisions to safeguard your investment.

Today’s mortgage rates are top-of-mind for many homebuyers right now. As a result, if you’re thinking about buying for the first time or selling your current house to move into a home that better fits your needs, you may be asking yourself these two questions: Why Are Mortgage Rates So High?When Will Rates Go Back Down?Here’s context you need to help answer those questions.1. Why Are Mortgage Rates So High? The 30-year fixed-rate mortgage is largely influenced by the supply and demand for mortgage-backed securities (MBS). According to Investopedia: “Mortgage-backed securities (MBS) are investment products similar to bonds. Each MBS consists of a bundle of home loans and other real estate debt bought from the banks that issued them . . . The investor who buys a mortgage-backed security is essentially lending money to home buyers.”Demand for MBS helps determine the spread between the 10-Year Treasury Yield and the 30-year fixed mortgage rate. Historically, the average spread between the two is 1.72 (see chart below):Last Friday morning, the mortgage rate was 6.85%. That means the spread was 3.2%, which is almost 1.5% over the norm. If the spread was at its historical average, mortgage rates would be 5.37% (3.65% 10-Year Treasury Yield + 1.72 spread).This large spread is very unusual. As George Ratiu, Chief Economist at Keeping Current Matters (KCM), explains:“The only times the spread approached or exceeded 300 basis points were during periods of high inflation or economic volatility, like those seen in the early 1980s or the Great Financial Crisis of 2008-09."The graph below uses historical data to help illustrate this point by showing the few times the spread has increased to 300 basis points or more:The graph shows how the spread has come down after each peak. The good news is, that means there’s room for mortgage rates to improve today.So, what’s causing the larger spread and making mortgage rates so high today?The demand for MBS is heavily influenced by the risks associated with investing in them. Today, that risk is impacted by broader market conditions like inflation and fear of a potential recession, the Fed’s interest rate hikes to try to bring down inflation, headlines that create unnecessarily negative narratives about home prices, and more.Simply put: when there’s less risk, demand for MBS is high, so mortgage rates will be lower. On the other hand, if there’s more risk with MBS, demand for MBS will be low, and we’ll see higher mortgage rates as a result. Currently, demand for MBS is low, so mortgage rates are high.2. When Will Rates Go Back Down?Odeta Kushi, Deputy Chief Economist at First American, answers that question in a recent blog:“It’s reasonable to assume that the spread and, therefore, mortgage rates will retreat in the second half of the year if the Fed takes its foot off the monetary tightening pedal and provides investors with more certainty. However, it’s unlikely that the spread will return to its historical average of 170 basis points, as some risks are here to stay.”Bottom LineThe spread will shrink when the fear investors feel is eased. That’ll mean we should see mortgage rates moderate as the year goes on. However, when it comes to forecasting mortgage rates, no one can know for sure exactly what will happen.

According to a recent Harris Poll survey, 8 in 10 Americans say buying a home is a priority, and 28 million Americans actually plan to buy within the next 12 months. Homeownership provides many financial and nonfinancial benefits, so that interest is understandable.However, it’s unlikely all 28 million Americans will accomplish that goal in the coming year. Experts project a total of around five million homes will be sold in 2023. Why is there such a big difference? It’s partly because there can be challenges to buying a home.In the same survey, when asked, “Which of the following are preventing you from pursuing homeownership at this time?”: 34% answered, “I don’t have enough saved for a down payment” 30% answered, “My credit score”If you’re aiming to buy a home, here’s what you need to know to accomplish that goal.Save for Your Down PaymentYour down payment is a big chunk of what you pay up front for your home. For most home purchases, buyers put down some amount of cash up front (a down payment) and then take out a loan (a mortgage) to pay for the rest.It’s a longstanding myth that you need to pay 20% of the purchase price for your down payment. In reality, 20% down isn’t always required. In fact, according to the National Association of Realtors (NAR), today’s median down payment is 14% for the average buyer and just 6% for a first-time buyer.Regardless of how much money you can save for your down payment, know there’s help available. A local lender can show you options to help you get closer to your down payment goal. Plus, there are even loan types, like FHA loans, with down payments as low as 3.5% for some buyers, as well as options like VA loans and USDA loans with no down payment requirements for qualified applicants.Beyond assistance programs and different loan types, here are a few other tips to help you as you save for your down payment: Remember to factor in closing costs. In addition to your down payment, closing costs are usually 2-5% of the home's purchase price. Maintain your savings. Your down payment shouldn’t deplete all your savings. It’s important to still have some money set aside for homeownership expenses after you move in. Explore your options and lean on your trusted advisor for expert guidance. Do your research, ask questions, and look into the resources available for buyers like you.Improve Your Credit ScoreYour credit score is a number that indicates how financially reliable you are to lenders. A higher credit score usually means you’ll be able to borrow more money at a better interest rate. If your credit score is preventing you from getting an affordable mortgage, there are steps you can take to improve it. Here are two: Pay your bills on time. When you pay your bills on time, your credit score improves. When you’re late, it takes a hit. One way to make paying your bills on time easier? Set up automatic payments when and where you can. Mix it up. From auto loans, to credit cards, to mortgages – there are several different types of credit. And having a mix of them improves your credit score.Bottom LineIf you want to purchase a home this year, let’s connect so we can start preparing.